Redundancy reminders: can you have a redundancy pool of one?

Amidst the current cost of living crisis and economic uncertainty, it is likely that there will be some redundancies in the pipeline. Managing a redundancy exercise can be daunting, and organisations need to ensure that a fair process is followed. It is tempting to try to shortcut to get through it or go for a seemingly “easy option” when looking at who to put at risk.

Getting the redundancy process wrong can be costly for employers and can also damage staff morale (even more than the fact of redundancies at all). On the purely legal side, a successful unfair dismissal claim (if the employee has the requisite qualifying employment period) can result in basic and compensatory awards being made to the employee.

The recent case of Mogane v Bradford Teaching Hospitals NHS Foundation Trust highlights the importance of a fair selection process and the risks associated with employers creating a redundancy pool of one.

So, can you have a redundancy pool of one? Yes, in theory, but not if your decision to have a pool of one was arbitrary and you should have consulted with the single pooled employee. Read on for more detail.

Background

In the Mogane case, the claimant had worked for the trust since 2016 and was one of two nurses employed at the band six level on a series of fixed term contracts. The trust implemented a redundancy exercise in order to cut costs. In deciding the selection criteria for redundancy, the trust decided to use the length of time left on the nurses’ fixed term contracts to determine the redundancy pool. The claimant’s fixed term contract was due to expire prior to her colleagues so the trust put her in a redundancy pool of one, meaning that her selection for redundancy was inevitable. Consultation with the claimant took place after this decision had been made and alternative roles were considered for her. However, none of the alternative roles were suitable, and as a result she was made redundant.

The claimant brought a claim of unfair dismissal to the employment tribunal. The employment tribunal dismissed this claim and the claimant appealed to the employment appeal tribunal (EAT). The EAT held that an unfair dismissal had taken place. They emphasised that consultation is a fundamental aspect of a fair redundancy procedure. Since placing the claimant in a redundancy pool of one “resulted in a fait accompli of the claimant being dismissed”, consultation should have taken place prior to that. The decision to apply the sole criterion of time remaining on the nurses’ contracts should also have been up for consultation. The fact that the claimant was not consulted at a point when she potentially could have influenced the outcome of the redundancy process made the decision unfair.

The EAT also held that due to the implied term of trust and confidence between employers and their employees, employers cannot act arbitrarily towards employees in their selection methods for redundancy. In this case it was found that the trust did act arbitrarily in choosing the time left on the nurses’ contracts as being the sole criterion for redundancy.

Implications of the case

The judgement in this case provides a reminder of the importance of following the correct procedure when making redundancies and demonstrates how a failure in part of the process can render the whole process unfair. Below we explore the lessons learnt from this case in the particular context of a fair selection process and the need for adequate consultation.

Fair Selection Process

In order to facilitate a fair selection process, employers should start by considering which roles it would be appropriate to include in the redundancy pool as being at risk from redundancy. Employers have discretion over the roles to be included in the pool, but they should ensure that there are no discriminatory reasons behind their composition of the redundancy pool.

Mogane v Bradford demonstrates the risks associated with creating too narrow a redundancy pool. This judgement doesn’t mean that a pool of one can never be used, but if the selection criteria used to identify the pool has the practical effect of making the decision for redundancy, it essential that consultation with the affected employee takes place before this decision is made. If this is not the case, a tribunal will likely take the view that an unfair dismissal has taken place.

An additional aspect of a fair selection process is that fair selection criteria need to be used by an employer, and applied in a fair and objective manner. Commonly used selection criteria include length of service (although be careful of age discrimination), attendance (and be careful of disability discrimination and pregnancy discrimination) and performance of an individual.

Employers should ensure that the selection criteria are applied fairly by using objective evidence, such as appraisals or performance reviews, to justify their decisions. Where more subjective views are required, at least two decision makers should be involved in order to reduce the risk of bias. Mogane v Bradford reinforced the fact that arbitrary choices in relation to the selection criteria will be seen by the tribunal to breach the implied term of trust and confidence between employers and employees. In order to protect themselves, employers should ensure that the rationale behind the decision leading to the relevant selection criteria is well documented, in order to dispel any allegations that it has been decided or applied in an arbitrary way.

Consultation

One of the EAT’s key criticisms in Mogane v Bradford was the way in which consultation with the claimant took place. The tribunal held that consultation is a fundamental aspect of a fair redundancy procedure. Consultation has to be genuine and meaningful in order for a fair consultation process to have taken place. This involves giving employees the opportunity to fully understand the matters on which they are being consulted and giving them the opportunity to express their thoughts on this. In facilitating this process, employers need to give employees adequate information, as well as adequate time to respond.

It is important that employers keep an open mind throughout the consultation process and genuinely and appropriately consider the views expressed. Consultation is not simply a tick box exercise and employers should not have already made a decision about redundancy before consulting with the affected employees. As is demonstrated in the judgement in Mogane v Bradford, the timing of consultation will also affect whether the redundancy process is deemed to have been fair or not. It is essential that consultation takes place at a point when an employee can still potentially alter the outcome of the decision.

By following best practice, employers can reduce the risk of errors in the redundancy process which could result in a finding of unfair dismissal. The importance of genuine consultation cannot be underestimated, and this applies equally to individual and collective redundancies.

Additional resources on redundancy exercises

For more detailed information on redundancy exercises, please see the other redundancy reminder blogs that we have published:

• Top ten pitfalls to avoid when handling redundancy exercises
• How to run a fair selection process
• Employee consultation: redundancies and beyond
• Alternatives to making redundancies

With many thanks to Emily Waterhouse, a current trainee in our Employment team, for co-authoring this blog.

If you require further information about anything covered in this blog, please contact Kathleen Heycock or your usual contact at the firm on +44 (0)20 3375 7000.

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

© Farrer & Co LLP, November 2022