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Marc Jones, partner at Turbervilles, looks at how employers should conduct the selection process when dealing with redundancies
What system should the employer use when choosing a selection pool?
When facing the possibility of redundancies, employers should analyse which employees are performing work of a particular kind that has either ceased or diminished. This is known as the selection pool.
An employer needs to be able to show that the system for choosing the pool is fair. If it cannot, then any redundancies could lead to claims for unfair dismissal.
If there is a customary arrangement or procedure for choosing a pool, this should be used unless the employer can show objective grounds for not using it.
If there is no customary arrangement or procedure, the employer simply needs to show that it has considered the pool carefully and acted with genuine motives.
Who should be in the selection pool?
The pool should contain all employees who perform the same or similar type of work in a particular department or at a relevant location. The pool should not be structured so that one group of employees is disadvantaged, such as part-timers.
Certain groups of employees can be included in the pool even though the redundancy exercise does not on the face of it affect them, as the targeted jobs occur elsewhere within the company, such as if the jobs in the pool are interchangeable.
If only one employee is identified within the pool, the individual performing that role will be in a unique position and there is no requirement to go through a selection procedure. However, if the selection pool is flawed then the employee who is made redundant may have a claim for unfair dismissal.
How should the employer select employees for redundancy?
The selection criteria, which will normally form part of a selection matrix, must be systematic, consistent, justifiable and objective (as possible), and applied fairly. A points scoring method is commonly used. The selection matrix will normally include such factors as: length of service, productivity, timekeeping, attendance records, efficiency, employee's adaptability and the employer's future needs.
The lengths to which an employment tribunal expects an employer to go in drawing up and applying criteria will depend on the employer's size and administrative resources. Therefore less is expected of a smaller employer. However, even small employers must show that they used a fair selection method.
Which selection criteria are fair?
If a selection matrix has been agreed in advance with a union or an employee representative body, generally this should be used. Otherwise it is a case of the employer choosing fair criteria. Objective criteria commonly include a selection of the following:
Skill and knowledge - this must be clearly defined and assessed objectively
Attendance records - this can amount to unlawful discrimination against disabled employees and therefore care should be taken as to whether ‘one-off' illnesses, long-term absences or work-related injury absences are to be included or excluded
Sickness absence - this overlaps with attendance records and care should be taken to avoid any discriminatory effect
Age - at present age discrimination is not unlawful, although it may be unfair, ie as the Code of Practice on Age Discrimination may be taken into consideration by tribunals - it may also amount to indirect discrimination on the grounds of sex
Adaptability/flexibility - this is difficult to measure objectively and an unwillingness to relocate may indirectly discriminate against women who tend to be primary carers
Performance - the scoring should be measured as objectively as possible
A tribunal will usually accept some subjective criteria, such as communication skills or attitude, provided they are balanced with objective ones.
The application of certain criteria, such as pregnancy, part-time working, fixed-term working or indeed length of service, may be directly or indirectly discriminatory.
When should alternative employment be offered?
The employer's duty is not limited to offering similar positions or positions in the same work place. In some situations the employer is expected to have carefully considered bumping another employee and offering the job to the redundant employee, ie an employer may offer a redundant employee another employee's job and the other employee is then treated as dismissed for redundancy.
When offering alternative employment, employers must give sufficient detail of the vacancy and allow a trial period. Failure to do so is likely to make the dismissal unfair. It is up to the employee whether to accept the alternative employment, which might even involve demotion or a reduction in pay. Employees who unreasonably refuse an offer of suitable alternative employment will lose their entitlement to a redundancy payment.
One of the main purposes of the consultation process (see legislation guide on redundancy consultation process) is to consider other employment, for example, transferring to another workplace as an alternative to dismissal. An employment tribunal will consider what vacancies exist throughout the employer's operation and with any associated employer. A tribunal will look at vacancies existing during the consultation period and during the employee's notice period as well as the time of dismissal itself.
Case law states that employees on maternity leave should be fully consulted and provided with all job opportunities, even if the employer does not consider them to be suitable.
Where there are a limited number of positions available, an employee on maternity leave must be offered suitable alternative employment in preference to other employees who are similarly affected by the redundancy situation. Contrast this with the usual position, which is that alternative employment must simply be considered but there is no obligation to offer it.
An employee who has been given notice of termination on grounds of redundancy and has two years' continuous employment should be given a reasonable amount of time off work during their notice period to look for work or make arrangements for training in respect of alternative employment. An employee is entitled to receive a minimum amount of 40% of a week's pay for time off.
What is involved in the selection process?
The selection criteria should be applied to the pool of employees in the manner agreed. If no agreement can be reached with the employee and/or their representatives, it will be for the employer to decide on a fair and reasonable approach for the criteria to be used.
Once employees have been provisionally selected for redundancy, they should be informed in writing, individually invited to a meeting and given reasons why they have been selected. At this meeting, employees should be given the opportunity to be accompanied by a work colleague or a trade union representative.
There generally is no requirement to disclose another employee's marks under the selection process.
A further meeting should be arranged to discuss alternative employment. However, if alternatives cannot be found or there is no alternative employment, dismissal will occur. The employee should be encouraged to put forward any suggestions they may have as to jobs they might be interested in.
Once all options have been considered and it is apparent that an alternative role cannot be found, employees should be informed in writing and advised that redundancy is the only option. At that stage formal notice of termination can be given.
When should a ‘right of appeal' be provided?
It is good industrial relations practice to provide a right of appeal and this is recommended in the Acas Code of Practice. A right of appeal will be compulsory from 1 October 2004. There will be exceptions:
In relation to collective redundancies where the employer proposes making 20 or more employees redundant within a 90-day period
When there is a sudden closure of the business (or part of it), for example, because of a fire.
The law relating to redundancy is generally found in the Employment Rights Act 1996 as amended and the Trade Union and Labour Relations (Consolidation) Act 1992