Scores on the doors
As part of our focus on topical employment law issues, James Gutteridge looks at two recent decisions on redundancy scoring exercises. As ever, there are potential pitfalls for managers involved in redundancy scoring, but the cases set out below should provide some reassurance.
Redundancy is one of the five potentially fair reasons for dismissal, set out in the Employment Rights Act 1996 (ERA).
However, notwithstanding that a dismissal may be genuinely on the grounds of redundancy, an employer must then go on to show it acted reasonably in dismissing the employee in all the circumstances. Fairness in all the circumstances, in the redundancy context, is likely to include
- a correct pool for selection
- objective selection criteria and scoring; and
- offers of suitable alternative employment (if available)
In Dabson, the EAT considered the circumstances in which an Employment Tribunal should re-examine the marks awarded by a manager in a redundancy exercise; and in First Scottish Searching, the EAT looked at the scoring of employees in a post-TUPE redundancy exercise – should the scores be moderated between two sets of employees, where one set (and the managers scoring them) had always been in the employment of the transferee and the other had previously been in the employment of the transferor?
Also on the topic of scoring employees in a redundancy exercise, please see our April 2011 article, Mothers in law , on scoring where an employee in the pool for selection is absent on maternity leave.
In Dabson, Mr Dabson was placed at risk of redundancy from his role as a transport manager. He was scored against objective selection criteria, on the basis of which he was provisionally selected for redundancy. Two consultation meetings were then held with Mr Dabson, after which his redundancy was confirmed. An Employment Tribunal found that Mr Dabson’s selection for redundancy was fair, and Mr Dabson appealed. The main thrust of his appeal was that the Employment Tribunal had failed to properly consider the fairness of the scoring of Mr Dabson which, for various reasons, he said was unfair.
In First Scottish Searching, the Respondent acquired two other businesses: Douglas & Co and SPH. The acquisition involved a transfer under the Transfer of Undertakings (Protection of Employment) Regulations (TUPE) and the Claimants, who were formerly employed by SPH, transferred to the employment of First Scottish Searching Services Limited. It was accepted by the Claimants that there was a genuine redundancy situation. First Scottish employees were scored by their First Scottish managers. SPH employees, including the Claimants, were scored by two SPH managers who had transferred across. A scoring matrix that had been used by First Scottish in a previous redundancy exercise, before the TUPE transfer, was used by both sets of managers. This, the Tribunal found, was unfair because there should have been some system of ‘moderation’ between the scores awarded to employees who had always been employed by First Scottish and the scores awarded to employees who had transferred into the employment of First Scottish via the TUPE transfer.
In Dabson, the Employment Appeal Tribunal (EAT) rejected Mr Dabson’s appeal and said that the marks awarded in a redundancy selection exercise should only be investigated in exceptional circumstances, such as bias or obvious mistake; and there was no evidence of this in the facts of this case.
In First Scottish, the EAT upheld the employer’s appeal against the Tribunal’s decision that the Claimants’ scores should have been ‘moderated’ between two different groups of employees.
The Tribunal had made no findings of fact about what system of moderation might have been used or what difference it might have made. Furthermore, there was no evidence that the process had been carried out in bad faith, in order to favour the transferee's employees, or that there had been any actual unfairness as a result of the lack of ‘moderation’ of scores. The EAT commented that in an ideal world perhaps it was arguable that First Scottish should have found some way of ensuring their managers’ interpretation of the selection criteria was the same as the SPH managers’ interpretation. However, the EAT felt that the tribunal had erred in seeking a ‘perfect’ approach; and the ERA, they noted, requires only fairness, not perfection.
What does this mean for me?
These decisions are reassuring for employers embarking on redundancy exercises, as they confirm that
- as long as a fair and unbiased approach is taken, managers may be confident that an employment tribunal should not re-visit their scoring in any detail; and
- a failure to moderate scores, post TUPE transfer, will not, of itself make a dismissal unfair. That said, the employment tribunal was criticised because it failed to identify any actual unfairness in respect of the scoring of the two sets of employee (after having identified the potential for unfairness where there are two sets of employee being assessed). So, it is possible that there could be unfairness if, post transfer, a different approach is taken to, for example, subjective criteria or if, for example, there is inconsistency between appraisal systems used to assess each set of employee.
Employers will, however, no doubt be pleased to hear that the EAT has confirmed that perfection is beyond the scope of the ERA!