This case concerns the fairness of a redundancy process carried out by an employer, specifically related to the manner in which the procedure should be carried out.
The facts in Mitchells Of Lancaster (Brewers) Ltd v Tattersall
The Claimant commenced employment with the Respondent (a brewer and the owner of hotels and public houses) as a property manager in May 1998. He had continuous employment in this capacity until 22 October 2010, when he was dismissed by reason of redundancy.
From May 1998 until 22 October 2010 the Claimant was part of the Senior Management Team at the Respondent. During 2010 the Respondent started to experience serious financial difficulties, particularly relating to its cash flow. The Senior Management Team had identified the need for cost savings and had already reduced the staff count at the Respondent.
On 15 June 2010 four of the Senior Management Team met to discuss the possibility of redundancies. The Claimant was not in attendance. At this meeting it was recommended that investigations be undertaken into the possibility of making members of the Senior Management Team redundant. On 6 July 2010 it was decided that the Claimant’s position would be made redundant because of his perceived lack of ability to bring revenue into the company.
The Claimant was in fact made redundant after going through a redundancy procedure which consisted of four individual redundancy consultation meetings. The Claimant was dismissed on 26 July 2010. He subsequently made a complaint of unfair dismissal to the Employment Tribunal.
The Employment Tribunal found in the Claimant’s favour and made a finding of unfair dismissal relating to the procedure of the redundancy. This was based upon four elements: the redundancy pool should have contained the five members of the Senior Management Team, instead of just the Claimant; the selection criteria were not objective enough; the Claimant wasn’t allowed to argue his case sufficiently; and personal antagonisms between the Claimant and another member of the Senior Management Team rendered the decision unfair. However, although the Employment Tribunal found the Respondent liable for unfair dismissal it reduced the Claimant’s compensation by 20% by way of a Polkey reduction.
The Respondent appealed against the finding of unfair dismissal and, in the alternative, appealed on the basis that the Polkey reduction should be increased to a figure higher than 20%.
The law relating to unfair dismissal, specifically that relating to the redundancy pool
Under s.94 of the Employment Rights Act 1996 employees have a right not to be unfairly dismissed. In order to fairly dismiss employees a “potentially fair reason” must be advanced. This “potentially fair reason” must fall under the reasons specified in s.98(4) Employment Rights Act 1996, of which redundancy is one. The case for a redundancy should be made out (i.e. the business is closing or there’s a need to reduce the size of the workforce, among others). As with unfair dismissal generally, the dismissal of an employee must be substantively and procedurally fair for an unfair dismissal claim to be defeated.
To be substantively fair the dismissal for redundancy reasons must be within the reasonable range of responses in the circumstances. For the dismissal to fall within the reasonable range of responses the Respondent must conduct a thorough and impartial redundancy process, must have a reasonable belief in the need to dismiss the Claimant as a result of this redundancy process, and must have an honest belief in the need to make redundancies.
For the dismissal to be procedurally fair, the Respondent must (obviously) carry out a fair procedure. A fair consultation procedure should be carried out, a genuine redundancy situation must exist, and the employer must consult with the employee properly regarding alternative employment. For a fair consultation procedure to have taken place the Respondent must have, among other things, constructed a fair redundancy pool and used fair and objective selection criteria.
Whether a fair redundancy pool has been constructed will depend on the facts of the matter, particularly on a consideration of who has a comparable position to the Claimant.
Should the employer have established a substantively fair dismissal but accrued liability for unfair procedural dismissal then a Polkey reduction may be applied to the award of compensation.
The Employment Appeal Tribunal’s decision in Mitchells Of Lancaster (Brewers) Ltd v Tattersall
The Employment Appeal Tribunal upheld the fairness of the dismissal on one account – the failure to construct a fair redundancy pool. The evidence before the Employment Tribunal (the meeting on 15 June 2010) had suggested to it that the redundancy pool should comprise the five members of the Senior Management Team, not just the Claimant. The failure to consider the other four members of the Senior Management Team for redundancy rendered the procedure unfair.
However, the Employment Appeal Tribunal upheld the Respondent’s appeal against the value of the Polkey reduction. The matter was remitted to the Employment Tribunal for a finding on compensation, with a direction to the Employment Tribunal that the 20% reduction should be increased.
Our specialist employment lawyers’ thoughts on Mitchells Of Lancaster (Brewers) Ltd v Tattersall
This case was won at first instance and appeal by the Claimant on the strength of the fact that he had access to documentary evidence that the redundancy pool should have been widened. Apart from that, the redundancy procedure, according to the Employment Appeal Tribunal, was fair. Employees should be aware that employers have considerable discretion in whether to make redundancies and as to who should be made redundant. Unless there is a clear element of unfairness (such as a failure to carry out a procedure at all) then the fairness of a dismissal is a matter of degree and hinges upon the evidence that the Claimant can obtain. In most circumstances the Respondent possessed the necessary evidence related to the redundancy procedure and it can be difficult to obtain this.