New Law Journal | 16 November 2012 | www.newlawjournal.co.

uk

SPECIALIST LEGAL UPDATE 1415

Employment

Selection box
Employers enjoy a high degree of exibility when choosing redundancy selection criteria, says Antoine Tinnion
IN BRIEF
No obligation to use strictly objective criteria in redundancy selection exercises. Selection criteria are not subjective merely because assessment requires judgment.

n Mitchells of Lancaster (Brewers) Ltd v Tattersall [2012] UKEAT/0605/11/SM, Lord Neuberger, the countrys most senior judge, has given his approval to the trend away from requiring employers to use objective selection criteria in redundancy situations. Mr Tattersall worked for the respondent, a small brewing and hotel company, as its property manager. His duties entailed managing the maintenance team and liaising with local authorities on planning and regulatory matters. He reported to the board of directors, and was one of its five member senior management team (SMT). In 2010, the respondent was in financial difficulties. When cost-cutting measures proved insufficient, the respondent decided to have compulsory redundancies in its head-office and to dismiss one member of its SMT. At a board meeting, the directors decided to use only one redundancy selection criterion: to identify the member of the SMT whose post could be abolished with the minimum detrimental impact on the business. Applying that criterion, the board selected Mr Tattersall for dismissal, finding that he was the member of the SMT whose dismissal would have the least negative impact on the respondents efforts to improve its turnover and commercial position. Tribunal proceedings After his dismissal and an unsuccessful appeal, Mr Tattersall presented a claim to the tribunal alleging he had been unfairly

dismissed. A key complaint was the fact that the selection criterion used to select him for dismissal on redundancy grounds was, in effect, a purely subjective judgment by the board about who from the SMT should be dismissed. The tribunal agreed with this criticism, and held Mr Tattersalls dismissal to have been unfair: [T]hese criteria seem to us to be wholly subjective and based solely on the views of the directors, rather than being objective selection criteria of the kind that are capable of being scored or assessed or moderated in an objective and dispassionate way. We find that the selection process adopted in this case failed to meet the requirements for objectivity as set out in [Williams v] Compair Maxam and that the selection was consequently unfair. Appeal to EAT The respondent appealed to the Employment Appeal Tribunal (EAT), arguing it was wrong for the tribunal to characterise as unacceptable the criterion which the respondent had used to select Mr Tattersall from the SMT for dismissal. The EAT rejected the respondents appeal against the finding of unfair dismissal, finding that the tribunal was entitled to conclude that aspects of the way in which the respondent had conducted Mr Tattersalls dismissal on redundancy grounds had rendered it unfair. However, the EAT agreed with the respondent about the selection criteria. Giving judgment, Lord Neuberger said: As a matter of common sense, it is hard to see how it can be inappropriate for

a relatively small company in serious financial difficulty and five employees in a senior management position to apply [this] criteriawhen deciding which of those five senior managers to make redundant. The description of the criteria as wholly subjective does not appear to be helpful or accurate: of course such criteria involve a degree of judgment, but they are none the worse for that. Equally, to object to a criterion because it is based solely on the views of the directors does not seem to us to be a fair objection. Citing numerous recent authorities, Lord Neuberger added: Just because criteria of this sort are matters of judgment, it does not mean that they cannot be assessed in a dispassionate or objective way, although inevitably such criteria involve a degree of judgment, in the sense that opinions can differ, possibly sometimes quite markedly, as to precisely how the criteria are to be applied, and the extent of which they are satisfied, in any particular case. However, that is true of virtually any criterion, other than the most simple criterion, such as length of service or absenteeism record. The concept of a criterion only being valid if it can be scored or assessed causes us a little concern, as it could be invoked to limit selection procedures to box-ticking exercises. Review In Williams v Compair Maxam [1982] ICR 156, [1982] IRLR 83 the EAT provided guidance which has held good for 30 years: employers selecting for redundancy should seek to establish selection criteria which, so far as possible, do not depend solely upon the opinion of the person making the selection but can be objectively checked against such

1416 LEGAL UPDATE SPECIALIST

things as attendance record, efficiency, experience or length of service, and should then mark employees fairly in accordance with those criteria. In the intervening period, the EAT has recognised numerous limits to the Compair Maxam principles, in particular where the issue of potential alternative employment for those made redundant arises: (i) There is no rule of law that employers are required to adopt selection criteria which are exclusively objectivethe touchstone is always reasonableness (Ball v Balfour Kilpatrick Ltd [1997] ICR 740). (ii) Guidance in the authorities about the selection criteria to be applied in selecting for redundancy cannot be transposed to the process for deciding whether someone in a redundant post should be offered an alternative position (Morgan v Welsh Rugby Union [2011] IRLR 376). (iii) Not all aspects of an employees performance or value lend themselves to objective measurement, and there is no obligation on an employer always to use criteria capable of measurement (Samsung Electronics (UK) Ltd v Monte-DCruz [2012] UKEAT/0039/11/DM). In Tattersall, however, the EAT has gone further than those previous authorities in holding that an employers choice of redundancy selection criteria was reasonable even though there was only one selection criterion, the assessment of which depended entirely on the good faith judgment of those making the assessment (which Mr Tattersall challenged), and where the issue of alternative employment did not arise. It is difficult if not impossible to see how Compair Maxams requirement that

www.newlawjournal.co.uk | 16 November 2012 | New Law Journal

redundancy selection criteria in such a situation should not depend solely on the opinion of the person making the selection can be reconciled with the criterion adopted and approved by the EAT in Tattersall. Whether intentional or not, the EATs judgment in Tattersall undoubtedly represents a significant loosening of the requirement on employers to use objective criteria in redundancy selection cases. By stating that certain criteria remain objective notwithstanding the fact that their assessment is entirely a matter of judgment, Lord Neuberger has substantially reduced the scope for employees to argue that redundancy selection criteria are unreasonable because their assessment rests solely on management opinion. Questions The EATs judgment in Tattersall gives rise to a number of difficult questions. First, is a judgment about which posts can be abolished with the minimum detrimental impact on the business really a redundancy selection criterion at all, at least as that term is commonly understood? Presumably the goal of retaining those employees most critical to future success is a paramount objective of all redundancy selection exercises. Second, if two people, acting reasonably, are able to reach markedly different conclusions about how a redundancy selection criterion applies in a particular case, in what way can it truly be said that the selection criterion being applied is, in any meaningful sense, objective? Third, if Tattersall is correct, are the EATs criticisms of the selection criteria adopted in Compair Maxam now out of date? In Compair Maxam, the EAT was critical of a selection criterion which

involved retaining those in the pool who, in the opinion of the managers concerned, would be able to keep the company viable. Is that really any different to the criterion adopted by the employer in Tattersall? Fourth, if an employer is entitled to adopt redundancy selection criteria, the assessment of which rests entirely on the judgment of the assessor, is there any way an employee can challenge the reasonableness of their adoption or application to them absent proof of irrationality or bad faith on the employers part? Finally, is there any reason why only small companies can rely on the selection criterion approved in Tattersall? Presumably, large employers are as entitled as any other to seek to dismiss those employees who they genuinely consider add least value in times of financial difficulty. Conclusion It remains to be seen how far Lord Neubergers judgment in Tattersall will change the day-to-day approach of employment tribunals asked to consider the reasonableness of an employers choice of redundancy selection criteria and the fairness of their application. However, in giving a green light to the use of redundancy selection criteria which rest entirely on the judgment of management in cases where the issue of alternative employment does not arise, the balance has undoubtedly shifted in favour NLJ of employers.
Antoine Tinnion is a barrister at Trinity Chambers, Newcastle upon Tyne, specialising in employment law. He represented Mr Tatersall before the tribunal & EAT. E-mail: a.tinnion@trinitychambers.co.uk Website: www.trinitychambers.co.uk

Halsburys Law Exchange

www.halsburyslawexchange.co.uk Find us on Twitter: HLEThinkTank

HALSBURYS LAW EXCHANGE

An independent and politically neutral legal think tank which contributes to the development of law and the legal sector