Redundancy selection criteria must be objective – and this mantra, favoured by employment lawyers and HR professionals, is of significance in the current economic climate as employers embark upon redundancy exercises.
Employers have commonly relied upon "last in, first outO (LIFO) when selecting employees for redundancy. In most cases this is objective as it can be verified by reference to personnel records. However, since the Employment Equality (Age) Regulations 2006 (the 'Regulations') came into force, LIFO is subject to challenge as it can favour older employees. Older employees, it can be argued, are more likely to have a greater length of service than younger employees.
While the recent case of Rolls-Royce Plc v Unite the Union did not focus upon the lawfulness of LIFO itself, it is relevant because it's the first case to consider the lawfulness of length of service – and therefore age – in the selection of employees for redundancy.
Rolls-Royce and Unite entered into a collective agreement in respect of redundancy. This agreement contained a selection matrix containing five criteria.
Employees were scored against the criteria; they were also awarded one point for each year of continued service. Those with the lowest score were selected for redundancy. Rolls-Royce subsequently argued that, under the Regulations, use of length of service was unlawful and could not be justified.
The Regulations make it unlawful for employers to discriminate against workers on the grounds of age. Discrimination can, however, be justified if it is a Oproportionate means of achieving a legitimate aim". It is also possible to treat workers differently, by reference to length of service, when awarding 'benefits', provided that length of service is less than five years. Where length of service exceeds five years, the award of the benefit must fulfil a 'business need'": for example, by rewarding experience.
Rolls-Royce applied to the High Court and asked it to determine whether length of service, as a selection criterion, was a 'benefit' under the Regulations and, if it was, whether it fulfilled a business need. The company also asked whether use of length of service is a Oproportionate means of achieving a legitimate aim.
The High Court held that use of length of service as part of the selection process was lawful, as:
- it conferred a ObenefitO on a worker D namely, the retention of employment which would otherwise have been lost. This could be regarded as reasonably fulfilling a business need; and
- it had a legitimate aim, namely, the advancement of a policy to achieve a OpeaceableO process of redundancy selection which had been agreed with the union.
The High Court did state that its conclusion might have been different had the process focused only upon LIFO.
The case of E-Zec Medical Transport Service Limited v Gregory reiterates that it is essential to mark selection criteria fairly in redundancy exercises. It also demonstrates that a lack of evidence to back up a marking process can make a redundancy dismissal unfair.
Ms Gregory was dismissed following a redundancy selection exercise. Nine criteria were used. Some were marked using data in personnel files; others – including performance, commitment and attitude – were marked by the regional manager. There was, however, no attempt by the employer to consult with the unions or employees as to the method of selection, the criteria to be adopted, or the marking process. The regional manager assessed key criteria alone and was unable to support his marking by reference to documents. The dismissal was found to be unfair.
In light of the above, therefore, what criteria can employers rely upon and how should the selection process be carried out? The general rule of thumb is that criteria should not merely reflect a person's opinion. They should be objective and verifiable. For example, potentially fair criteria could include:
- individual performance and ability, which can be verified against performance appraisals; and
- attendance records – but be careful not to rely upon absence for pregnancy-related illness, maternity leave, family-friendly leave or absence for disability reasons so as to avoid associated allegations of discrimination.
Consultation should be carried out, as appropriate, with unions and employees on the method of selection, and the criteria and scores to be applied. Scoring should, ideally, be carried out by more than one person so as to minimise subjectivity. Clear contemporaneous notes should be maintained to support the marking process.
While it's not possible to guarantee that a tribunal will determine a selection process to be fair, if the above principles are taken into account, employers should be in a strong position to defend any unfair dismissal claims that may arise.
Louise Burn is an associate at Pinsent Masons: www.pinsentmasons.com
