The law says there is a genuine redundancy situation when an employee is dismissed because their employer decided to reduce the size of the workforce to do “work of a particular kind”. In Contract Bottling Ltd v Cave and McNaughton, the Employment Appeal Tribunal (EAT) said that employers did not have to identify “which particular kinds of work were overmanned” as long as they could show a general need to reduce numbers.
Basic facts
The new owner of Contract Bottling Ltd, Martin Thornton, decided to reduce overheads by cutting the numbers of administrative and accounts staff from ten to six.
The ten employees were put into a single pool and compared on generic grounds, although they did very different jobs and had very different skills. The company then dismissed the four employees who scored the fewest points and “filled the gap” by retraining the staff who remained.
Ms Cave and Ms McNaughton were among those who were dismissed.
Tribunal decision
The tribunal was very critical of the company’s “scatter gun” approach, particularly its focus “on reducing the wage bill [but] not identifying specifically the requirements of the business and in which areas, if at all, the work of a particular kind had ceased or diminished”.
In particular, the company had ignored the redundancy matrix set out in the employee handbook, which was much more objective than the one it had used. The person who marked the scoring did not know the team he was marking and was unable to explain the outcome to those who were made redundant. Mr Thornton also had an input into the marking, even though he did not know the employees at all and was involved in the decision to dismiss, as well as the appeal hearings.
The tribunal concluded that the selection process was unfair and that there was no meaningful consultation or consideration of alternatives to dismissal. The claimants had not, therefore, been dismissed by way of redundancy. It also declined to make a reduction in the claimants’ compensation on the basis that they would still have been made redundant, even if the procedure had been fair (known as a Polkey reduction).
EAT decision
The EAT, however, disagreed, saying that the reason for dismissal was redundancy. Noting the decision in Murray v Foyle Meats Ltd, the EAT said that “ the first question ... was whether there was a diminution in the requirements of the business for employees to carry out work of a particular kind”.
In this case, the company clearly needed to reduce the number of employees carrying out certain types of work in the administration department. The EAT said that it did not have to identify “which particular kinds of work were overmanned” as long as it could show a general need to reduce numbers.
The second question was whether the dismissals had arisen because of that need. Although the choice of pool was “rather surprising”, it was clear that the people identified for redundancy had been “bumped” out of their jobs (their skills were still needed but someone who scored more would be retrained to do their job.) The dismissals could therefore be attributed to a “diminution in the requirements of the business for employees to carry out work of a particular kind or particular kinds” and the disparate and unsatisfactory nature of the pool did not affect that conclusion.
But although the tribunal was mistaken in its approach, it had still reached the right conclusion that the dismissals were unfair.
Describing the tribunal’s criticisms of the company’s scoring matrix as “compelling”, the EAT upheld the finding of unfair dismissal in each case. However, it found that the tribunal should have considered a Polkey reduction and remitted the case to the same tribunal to have another look and give detailed reasons for its conclusions.