Engineered redundancies…?

Two recent cases from the Employment Appeal Tribunal have upheld the fairness of dismissals where redundancy could, arguably, have simply been the pretext for the dismissal of poorly performing employees. In one case the employer recruited an employee knowing that they would be surplus to requirements and then dismissed the remaining employee; in the second case there was evidence that the employer had concerns about the employee’s capability prior to selection for redundancy.  Does this show, where there is a redundancy situation, a trend towards tribunals not looking too closely at other possible reasons for dismissal?  Sarah Lamont reports.

The background

A dismissal will be by reason of redundancy if it is wholly or mainly attributable to the employer’s diminishing requirement for employees to carry out work of a particular kind, either:

• in the place where the dismissed employee was employed, or
• within the organisation generally.

This definition is found at section 139(1)(b) of the Employment Rights Act 1996. 

Three important points to note in the context of the cases reported below are

• employment tribunals are under an obligation to establish the real reason for a dismissal.
• In general, a tribunal will not look behind the employer's decision that it needs fewer employees; or require it to justify how or why the diminished requirement has arisen, provided redundancy is genuinely the reason for dismissal. 
• An employer does not need to establish that redundancy was the sole reason for a dismissal; only that it was the principal reason (section 98(1)(a) Employment Rights Act 1996).

The facts

In Malekout v Ahmed (t/a The Medical Centre), the Claimant, Mr Malekout, had worked as the Practice Manager of a GP’s surgery for 13 years, running all non-clinical administration matters for the Partners of the practice (the Respondents).

It came to light that Mr Malekout had repeatedly and falsely told the partners at The Medical Centre that the Primary Care Trust was unconcerned about the practice.  Working relationships between Mr Malekout and the The Medical Centre became strained and Mr Malekout handed a letter to one of the partners stating that he had received a job offer and wanted to discuss his current employment; but he did not actually resign.

The partner replied to Mr Malekout’s letter indicating that it would be in all parties' interests if his employment terminated by the end of the month.   Worried that the practice would be left without a manager, the partner employed a short term ‘trouble shooter’, Mr Kader, to help Mr Malekout.  Within a few weeks, Mr Kader’s hours increased, and he eventually assumed responsibility for a number of Mr Malekout's duties. Staff and other contractors began to divert queries to Mr Kader rather than Mr Malekout, leading to diminished responsibilities for Mr Malekout. Mr Kader also identified further failures in Mr Malekout’s performance.

The Medical Centre then undertook Mr Malekout’s first appraisal in 13 years (!), which highlighted that trust and communication had broken down between Mr Malekout and the practice. It was clear that the practice had serious concerns about Mr Malekout's ability to undertake his responsibilities. Mr Malekout went on sick leave, at which point the practice undertook a restructure. A document which made reference to the good performance of Mr Kader was distributed. Two weeks later, Mr Malekout was dismissed for redundancy.  Mr Malekout brought Employment Tribunal proceedings.

In the case of Fish v Glen Golf Club, the Claimant, Mr Fish, was employed by the Golf Club (‘the Club’) as its secretary.  The Club found itself in financial difficulties and engaged a management consultant to suggest how the situation may be turned around.  The Club accepted the consultant’s recommendation that the Club’s salary costs needed to reduce and, consequently, put several roles at risk of redundancy, including Mr Fish’s role. 

Mr Fish appealed against the decision to dismiss him for redundancy, arguing that the real reason for the dismissal was the Club’s concerns about his performance.  He then brought an unfair dismissal case, on the same basis.   

The documentation relating to Mr Fish’s employment suggested that redundancy might not have been the real reason for the dismissal.  Specifically, there were two versions of the management consultant’s report

• an edited version: this was presented to Mr Fish during the redundancy consultation and was uncritical / complimentary and did not identify any specific individuals to replace Mr Fish, suggesting that the question was still open; and
• an unedited version: this was only seen by Mr Fish after he brought employment tribunal proceedings.  This document was critical of Mr Fish and contained an organagram in which Mr Fish’s role had been replaced with a sub-committee of named individuals.

In each of the cases outlined above, the employment tribunal had to determine the principal reason for each of the dismissals: were these dismissals ‘dressed-up’ or engineered as redundancies as a pretext for dismissing unsatisfactory employees, or could these dismissals be characterised as redundancies, notwithstanding the concerns that were clearly in the minds of the employers before the dismissals took effect?

The decisions

In both these cases, the EAT held that the principal reason for each dismissal was redundancy.

The fact that there were circumstances leading up to the dismissals which suggested that the employer had wanted to terminate the employee’s employment for other reasons did not preclude the principal reason for the dismissal being redundancy.

In Mr Malekout’s case, the EAT gave fairly short shrift to the argument that the employer had ‘engineered’ the redundancy, by recruiting the Mr Malekout’s replacement while Mr Malekout was still in employment. The EAT said that having two people in post for effectively one job would inevitably result in two employees being reduced to one. Looking at the definition of redundancy set out above, that amounts to a diminution in the requirement for employees to carry out work of a particular kind.  The EAT did not feel the need to examine why there were two people in post when only one was needed.

In Mr Fish’s case, the EAT noted that there were ‘rival reasons’ for the dismissal of Mr Fish, but the tribunal had correctly regarded the differences between the two management consultant’s reports as ancillary to, rather than central to, the question of the real principal reason for the dismissal.  Again, like with Mr Malekout’s case, the EAT was willing to accept that, because there was a genuine redundancy situation, that was the principal reason for the dismissal.

What does this mean for me?

Will these decisions have HR professionals reaching for the Champagne, to celebrate tribunals’ apparent willingness to allow employers to dismiss for sham redundancy reasons – thereby by-passing a potentially complex and unpalatable capability procedure?  Sad to say, the answer is probably no.  What we can say, however is this

• both these cases suggest that tribunals appear to be leaning away from a close scrutiny of the reason for a dismissal, where redundancy is one of two or more plausible reasons for dismissal.
• Therefore, it is possible that an employment tribunal may regard evidence of dissatisfaction with an employee prior to selection for redundancy as contextual only, and find that the real principal reason for the dismissal was redundancy.  Other reasons may well have come into play in the ‘mind’ of the employer, but remember that it is the principal reason for the dismissal that the tribunal will consider.
• Note that the Tribunal in the Malekout case specifically noted that there had been no impropriety in the recruitment of Mr Malekout’s replacement; if there had been – e.g. if Mr Kader had been brought in deliberately to make Mr Malekout’s role obsolete -  the result may well have been different.
• The good news is that these cases confirm that the fact that an employer might welcome a dismissal does not necessarily make the dismissal unfair.
• However, a future tribunal may well come to a different conclusion.  And, provided that the tribunal has applied the relevant law in a sensible manner, it will be difficult to appeal that decision (the EAT said that the hurdle in this type of appeal is that the tribunal’s conclusion of fact must be so wrong that it would “cause astonished gasps from the well-informed observer.”)