Case law updates: To what extent can subjective criteria be used in redundancy situations?

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The EAT has recently looked, in two separate cases, at the questions of whether it is acceptable to use subjective criteria when selecting for redundancy and when interviewing an employee at risk of redundancy for alternative employment

Background

For a dismissal for redundancy to be fair, the redundancy process must be reasonable and the employer must have considered suitable alternative employment (SAE).The EAT has recently looked, in two separate cases, at the questions of whether it is acceptable to use subjective criteria when: 1) selecting for redundancy; and 2) when interviewing an employee at risk of redundancy for alternative employment.

Redundancy and selection criteria

Mitchells of Lancaster (Brewers) Ltd v Tattersall

Facts

Mitchells of Lancaster (Brewers) Ltd employed Mr Tattersall as its property manager. He was one of five members of the senior management team (SMT). Cost savings were required. At a board meeting on 15 June 2010, it was agreed that one director would look at whether redundancies could be made at SMT level. At a further board meeting on 6 July 2010, the board discussed each of the five SMT roles and concluded that if the role of property manager was cut, this would have the least detrimental impact on the business because this was not a role that generated revenue. Cutting other SMT posts would, in the board’s view, have had a detrimental effect on attempts to improve the company’s trading position. The directors looked at the business skills of each manager and found that, other than Mr Tattersall, they all had the relevant skills to bring in revenue (these were the criteria used).Mr Tattersall was made redundant and brought a claim for unfair dismissal.

EAT’s findings

The employment tribunal found that Mr Tattersall had been unfairly dismissed. One of its reasons for reaching that conclusion was that the criteria used to select him for redundancy were ‘indefensibly subjective’ and ‘not capable of being scored or assessed or moderated in an objective and dispassionate way’. Mitchells appealed to the Employment Appeal Tribunal (EAT). It stated that the description of the criteria as ‘wholly subjective’ was neither helpful nor accurate . . . ‘of course such criteria involve a degree of judgment, but they are none the worse for that’.

The EAT continued ‘Just because criteria of this sort are matters of judgment, 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 . . . as to precisely how the criteria are to be applied and the extent of which they are satisfied. However, that is true of virtually any criterion, other than the most simple . . . 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’.

The EAT held that for a relatively small company in serious financial difficulty, it was difficult to see how it was inappropriate for Mitchells to apply the criteria used. Whilst the EAT still upheld the finding of unfair dismissal in this case on different grounds, its comments highlighted above are helpful to employers.

Comment

In this case, the employer did not use typical ‘assessable’ criteria such as attendance or disciplinary records, but it had assessed at board level that, objectively, the redundant role would cause the least detriment to the business.

Whilst this decision is helpful to employers, it does not provide carte blanche to use subjective criteria to select which employees will/will not be made redundant. If you are facing a redundancy scenario, you should always discuss your proposed selection criteria with your EEF adviser.

Even purely objective selection criteria can be problematic. For example, attendance records can lead to unlawful discrimination claims on grounds of disability or maternity, whilst length of service can lead to age and sex discrimination claims.

Our redundancy toolkit can provide you with ideas and guidance as to selection criteria. In particular, we provide a ‘Traffic Light Tool’ which categorises a number of potential redundancy selection criteria into red (do not use), amber (some legal risks) and green (normally safe to use as long as they are appropriate and you have the necessary evidence base).

Are the criteria used when interviewing potentially redundant employees for alternative employment unsatisfactory if they are ‘subjective’?

Samsung Electronics v Monte D’Cruz

Facts

Mr Monte-D’Cruz was employed by Samsung as one of four senior managers reporting to a Head of Print. Mr Monte-D’Cruz’s role was at risk when those four senior manager roles were combined into one head of department position. Mr Monte-D’Cruz was told he could apply for that new role and other newly created roles. He applied for both the head of department and Business Region Team Leader role, but was unsuccessful. For the latter role, he and one other internal candidate were interviewed but the company decided to appoint an external candidate. The criteria used for the new role were: creativity, challenge, speed, strategic focus, simplicity, self control/empowerment, customer focus, crisis awareness, continuous innovation and teamwork/leadership.

EAT’s findings

An ET held that the dismissal was unfair on several grounds. It raised concerns over the objectivity of the criteria used for assessing suitability of the alternative role and it noted that core competencies were not defined. The company appealed to the EAT, which upheld its appeal. It stated that not all aspects of an employee’s performance lend themselves to objective measurement and there is no obligation on an employer to use objective criteria in the context of an interview for alternative employment. The EAT said that the assessment as to whether a candidate will be able to perform in a new role will necessarily involve ‘a substantial element of judgment’.

Comment

This judgment confirms that an employer has considerable flexibility when assessing the suitability of employees who are at risk of redundancy for an alternative role, and that they may use subjective criteria. Employers should take heed of the EAT’s comments, however, that it is good practice for interviewers to check their understanding of the criteria being used.

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