When carrying out a redundancy exercise, employers have to adopt fair selection criteria and apply them fairly. In Mental Health Care (UK) Ltd v Biluan and Makati, the Employment Appeal Tribunal (EAT) held that it was not fair to use a redundancy selection exercise that was based entirely on assessments and which did not have the benefit of input from managers who knew the staff in question, and which resulted in the employer losing touch with common sense.

Basic facts

Following its decision to close a ward in a small residential hospital, the company announced in late 2010 that it intended to make 19 staff redundant. It selected the entire nursing and support staff (58 in all) who worked at the hospital as the pool from which to make the redundancies.

Staff were selected on the basis of a competency assessment (maximum 60 points); disciplinary record (maximum 20 points); and sickness absence record (maximum 20 points). Employees were selected for redundancy strictly according to their scores and for most, the competency assessment was decisive.

As none of the team conducting the assessments knew the individuals who were being assessed and did not rely on past performance appraisals, some of the selection decisions turned out to be “unexpected”, with some “good employees” chosen for redundancy, according to the acting hospital manager. However, as the process was felt to have been “robust” and “transparent”, none of the decisions were overturned.

Ms Biluan (a support worker) and Mr Makati (a nurse) were among those chosen for redundancy and who brought claims of unfair dismissal.

Tribunal decision

The tribunal held that the selection criteria used by the company were not fair as they were normally used for recruitment purposes and that the consultation was inadequate.
It concluded that: “By using this exercise and failing to consider such matters as length of service, appraisal records, the opinion of Managers who had known the employees concerned, so that views could be sought of the work records of the individuals concerned, we consider that the system used by the respondents was grossly unfair”.

The employer appealed, on the basis that the tribunal had substituted its own view for that of the employer.

EAT decision

The EAT said that although the tribunal could have been more explicit about how it came to its decision, it had not misdirected itself. It was unusual for an employer to carry out a redundancy exercise based entirely on assessments and “in those circumstances, whether or not a finding that the use of the criteria was unfair was inevitable, it cannot be said to be inexplicable”.

Acknowledging that the company had taken a lot of trouble over the redundancy selection exercise and put a lot of resources into it, it had nevertheless chosen an elaborate and HR-driven method which meant it did not have the benefit of input from managers who actually knew the staff in question. Despite the fact that it produced results that the company found “very surprising”, it stayed with the process because it was thought to be so “robust”.

The EAT concluded that: “We are not surprised that the Tribunal thought that a blind faith in process ... had in this case led to the Appellant losing touch with common sense and fairness. The goal of avoiding subjectivity and bias is of course desirable but it can come at too high a price; and if the fear is that employment tribunals will find a procedure unfair only because there is an element of “subjectivity” involved that fear is misplaced”.