Redundancy consultation must be with the workforce at the formative stage

De Bank Haycocks v ADP RPO UK Ltd

Irrespective of whether proposed redundancies are collective or individual, consultation in a redundancy situation should take place with a workforce at a formative stage to explore ways of avoiding redundancies. And selection criteria imposed by a parent company in another country are not necessarily going to pass the same tests of reasonableness in the UK.

Background

Mr Haycocks worked for ADP, a subsidiary of a US company. He was one of a team of 16 people who recruited for one client, Goldman Sachs. When COVID-19 hit, demand for new staff fell sharply and at the end of May 2020, ADP decided to reduce headcount. Its UK manager was given a scoring matrix from the US parent company to be used for selection purposes. Each employee was scored 1 to 4 on each of 17 entirely subjective criteria, Mr Haycocks coming last in the rankings. Scoring took place at the beginning of June 2020 before the later decision on 18 June on how many employees would be made redundant. On 19 June 2020 ADP set a timetable for the redundancy process. The initial consultation meeting was to be held on 30 June 2020, to be followed by a consultation period of 14 days, with those leaving being informed at a meeting on 14 July. ADP called Mr Haycocks to a meeting on 30 June 2020 and he was told there was a requirement for redundancies. It was explained that the purpose of the meeting was to inform him of the situation. He was also told that he could ask questions and could suggest alternative approaches to the reduction in demand. Mr Haycocks was invited to a further meeting on 8 July 2020. A final meeting was held on 14 July 2020 where Mr Haycocks was handed a letter of dismissal. In these meetings he was unaware of what scores he had achieved and was not given the scores of the other 15 as a comparison. He appealed against the dismissal, arguing that he had been scored too low. He complained that the dismissal was procedurally unfair, with the criteria used being entirely subjective. He also complained he had not been given information about the scores in order to challenge the scoring. An appeal meeting was held on 10 August 2020. Although Mr Haycocks did have his scores by the time of the appeal meeting, he was never shown the comparative scores of his colleagues. He bought a claim of unfair dismissal.

The tribunal accepted that Mr Haycocks knew nothing about his scores until after dismissal but concluded that the appeal process was carried out conscientiously. The tribunal held that, despite knowing the identity of the others on the list, Mr Haycocks had not demonstrated to it that his score should have resulted in a higher ranking. Mr Haycocks appealed to the EAT arguing that, amongst other things, the tribunal had overlooked the need for consultation, and that the lack of consultation at a formative stage made his dismissal unfair.

EAT decision

The appeal was allowed and the case referred back to the tribunal on the question of remedy.

The theme surrounding reasonableness in redundancy situations is that it reflects what is considered to be good industrial relations practice; that employers acting within the band of reasonableness follow good industrial relations practice. The substance of what amounts to good practice will vary widely depending on the type of employment, workforce and the specific circumstances giving rise to the redundancy situation. However, certain key elements are apparent. First amongst those is that a reasonable employer will seek to minimise the impact of a redundancy situation by limiting numbers, mitigating the effect on individuals or avoiding dismissal by engaging in consultation. The EAT discussed in some detail the JCB situation where workforce consultation had resulted in employees taking a pay cut.

The EAT examined all the relevant cases and noted that the nature of employment has changed radically since the 1980s when some of the leading cases were decided. The EAT considered that two matters are of particular significance:

1. the reduction of trade union membership (outside the public sector) in the workplace, and
2. the growth in employment where there is an international element in the corporate structure

Re 1, many more redundancy situations will arise in circumstances where there is no recognised representation for employees than would have been the case in the 1980s. It seems clear from the authorities that where there are representatives they should, normally, be consulted at the formative stages of any decisions on redundancy selection processes. However, the EAT commented that it is less clear that this should apply when there is a workforce that is unrepresented. This is because of the distinction that has been drawn between collective and individual consultation. It seemed to the EAT, particularly to the lay members, that this fails to recognise the reality of good industrial relations in the modern employment environment. Collective consultation is, in the opinion of the EAT, a reflection of good industrial relations in either type of workforce, and such consultation should generally occur at the formative stages of a process.

Re 2, the approach taken to employment law and good industrial relations, will vary significantly between nations. Here a tool for selection using entirely subjective criteria came, initially, from the US. If a method has been used in the larger organisation and found to be effective it is unsurprising that it would be thought reasonable to replicate it across the organisation. However, use of a system which reflects good industrial relations in another nation may not reflect the usual practice in the UK. The EAT observed that if it is considered to be reasonable for the employer to use US selection criteria solely because the organisation is a global one, this would not reflect a recognition of good industrial relations in the UK. This too is where the question of consultation at the workforce level is of significance. If discussions take place at an early stage those differences of good practice would probably emerge and it would be possible for an employer to take account of them.

Applying the observations above, the EAT held that there was a  clear absence of consultation at the formative stage. There was never any opportunity to discuss the prospects of a different approach to any aspect of the redundancy process chosen by ADP. The absence of meaningful consultation at a stage when employees have the potential to impact on the decision is indicative of an unfair process. There was no good reason for this consultation not to take place. As to the appeal, while this could correct any missing aspect of the individual consultation process, it could not repair the gap of consultation at the formative stage.

Comment

This is a very important case as it appears to impose on employers an obligation to consult with the workforce on proposed redundancies whether or not collective consultation has been triggered and failure to do so could render the dismissal unfair. This is no doubt going to be dependent on the reasons for the redundancy – if it is a general cost-saving exercise then the views of the whole organisation may be appropriate; if it is a change in processes in a particular department then the views of that department may only be necessary – it is important for employers to show they have applied their minds to the question. Larger employers who have not done so may be best advised to ask employees to elect an employee representative body with a mandate to consult on all employee relations matters, even if the collective consultation thresholds have not been met.

It also gives judicial backing to the approach taken by employee representatives for years in relation to selection criteria imposed by, primarily US, parent companies, which is that what might work in the US (where many states still have employment at will) it does not work here, especially if it is subjective.