Court of Appeal: no need for “general workforce consultation” in small-scale redundancy situations

For many employers, redundancy can be a challenging and delicate process. When dismissing employees for redundancy, ensuring a "fair" redundancy process is crucial so as to avoid or minimise claims for unfair dismissal.

As a reminder, it is generally considered good practice to:

• warn and consult employees of the possibility of dismissal;
• select fairly for redundancy (by identifying the pool and applying a fair selection criteria in a fair way); and
• search for alternative employment for those selected to avoid dismissal if possible.

In the case of small-scale redundancies (where fewer than 20 redundancies are proposed), collective consultation is not required. Instead, as part of a fair procedure, employers should invite employees to individual consultation meetings.

However, in September 2023, the Employment Appeal Tribunal (EAT) caused quite a stir in the employment world when it handed down judgment in the case of De Banks Haycocks v ADP RPO UK Ltd. The EAT found that employers should engage in “general workforce consultation” at an early, “formative stage”, even in the case of small-scale redundancies. This posed significant challenges for employers, especially as the EAT failed to offer any guidance on the suggested participants, timing or parameters of such a consultation.

Employers can now breathe a sigh of relief. On 29 October 2024, the Court of Appeal overturned the EAT’s ruling on “general workforce consultation”, as explained further below.

A brief background of the facts

Mr De Bank Haycocks (DBH) worked for ADP as part of the recruitment team. ADP decided to reduce the team’s size from 16 to 14 employees. Behind closed doors, ADP’s management conducted a scoring exercise, placing DBH and one other employee (who left voluntarily) in the bottom two, with DBH receiving the lowest score. DBH was invited to two individual consultation meetings, followed by a final meeting where he was formally dismissed. Before receiving his dismissal letter, DBH was not provided with his score or the scores of his colleagues. He appealed the decision to dismiss and was subsequently shown his score, but not the comparative scores.

After being made redundant, DBH brought a claim against ADP in the Employment Tribunal for unfair dismissal. The Tribunal rejected his claim and held that the appeal process had been conducted conscientiously and that the overall redundancy process was fair.

The EAT’s decision

DBH then appealed to the EAT arguing that the “constitution of the redundancy process was fundamentally flawed” and that the decision to dismiss was “effectively made” prior to the consultation period. The EAT upheld DBH’s appeal finding that the dismissal was procedurally unfair because there had been a lack of meaningful consultation at a “formative stage” in the redundancy process.

To the surprise of many, the EAT ruled that for small-scale redundancies, it should be treated as a requirement of good industrial relations practice for employers to conduct “general workforce consultation” before individual consultations. This decision effectively suggested that in small-scale redundancy processes in non-unionised workforces, employers must consult with a wider group than those who are at risk, effectively mirroring the collective redundancy process.

The Court of Appeal’s finding

ADP appealed to the Court of Appeal, which upheld the appeal (read the full judgment here). Fortunately for employers, the Court disagreed with the EAT’s finding on the use of “general workforce consultation”, arguing that it creates “a rebuttable presumption that a dismissal where there has been no such consultation will be unfair”. The Court maintained that consulting at group level should not be the standard approach, and any group-level consultation in small-scale redundancies should instead be determined on a case-by-case basis.

Key takeaways for employers

1. While there are established best practices for conducting a fair redundancy process, the fairness of any specific redundancy dismissal will always depend on the individual facts of the case.
2. Collective consultation is the usual forum to address common issues affecting the workforce, such as potential ways to avoid redundancies, reduce their number, or discuss procedural matters such as the choice of selection criteria. Where collective consultation occurs, individuals can still be consulted about issues particularly relevant to them in the course of their individual consultation.
3. In the absence of collective consultation, it is good practice to allow employees, during individual consultations, the opportunity to express their views on any issues that may impact the risk of their dismissal or its consequences, whether these issues are unique to them or common to the affected workforce.
4. Consultation ought to take place at a formative stage in the redundancy process where it can genuinely impact the outcome and while the decision-maker remains open-minded to suggestions made by employees. A dismissal may be deemed unfair if the employee is denied a genuine opportunity to affect the employer’s decision to terminate.
5. It is good practice to allow employees at risk of redundancy a chance to comment on the selection criteria before any scoring or selection exercise. However, failing to do so does not necessarily make the redundancy process unfair, as long as the employer remains open during consultation to being persuaded that the choice of criteria is unfair.
6. Employers should consider providing employees with their own scores during the consultation process and give them an opportunity to comment on them.
7. A fair internal appeal process can help cure procedural deficiencies earlier on the process. In this case, the Court of Appeal found ADP’s complaints were reasonably and fairly rejected on appeal following “conscientious investigation”.
8. While general workforce consultation is not mandatory for small-scale redundancies, it can still be useful in certain circumstances depending on the facts of the case.

Additional resources on redundancy

For more detailed information on redundancy, please see our previous blogs below:

• Understanding redundancy pooling: key lessons from recent EAT decisions
• Alternatives to making redundancies
• Redundancy dismissals: must employees be offered right to appeal?
• Top ten pitfalls to avoid when handling redundancy exercises
• How to run a fair selection process
• Employee consultation: redundancies and beyond

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, December 2024