News

05/12/2022

EAT judgment concerning fair procedure in redundancy dismissals

News

The EAT handed down judgment in Teixeira v Zaika Restaurant Limited & ors [2022] EAT 171 on 2 December 2022.

HHJ Tayler held that the Tribunal had erred in reducing the claimant’s compensatory award to zero on the basis the Respondent could reasonably have decided on a selection pool of one. The judgment provides a helpful summary of the law on the requirements of a fair procedure in the redundancy process, particularly for small employers.

Anna Dannreuther of Old Square Chambers acted for the successful appellant and was instructed by Amit Patel of Atkinson Rose LLP.

Background

The Claimant was employed as a tandoor chef at Zaika Restaurant in London. He was dismissed in early April 2020 when the Covid-19 pandemic caused restaurants to temporarily close. There were a total of ten chefs at Zaika Restaurant. The Claimant was the only one to be dismissed, while the remaining chefs were furloughed. The restaurant subsequently reopened.

There was no real dispute that the reason for the dismissal was redundancy. The Respondent also accepted that it did not operate any procedure before the Claimant was dismissed, and therefore that his dismissal was unfair, at least procedurally.

The Employment Tribunal identified that it had to decide “whether, and if so, when” the claimant “would have been dismissed had a fair procedure been followed”. The Tribunal’s finding on this was that “given that I have accepted that the [Claimant] could reasonably have been placed in a pool of one had Mr Dhaliwal put his mind to it, I consider that the redundancy would still have occurred when it did.”

The Claimant appealed on the basis that the Tribunal erred in law in its approach to determining that there was a 100% chance that the claimant would have been fairly dismissed at the same time as his actual dismissal had a fair process been followed. In particular, the appeal challenged the conclusion that because the claimant could reasonably have been put in a pool of one, he would have been dismissed when he was.

The Claimant also appealed the Tribunal’s findings that he could reasonably have been put in a pool of one and, had he been pooled with the other chefs, “the irresistible conclusion is that the [Claimant] would have been the lowest scorer”.

Helpful summary of the law

HHJ Tayler’s judgment provides a helpful summary of the law in relation to the fair procedure to be undertaken in redundancy cases, particularly for small employers where no union is involved. In particular, the EAT accepted the appellant’s arguments on the law, and the judgment highlights the following:

• Section 123 of the Employment Rights Act 1996 (“ERA”) provides that a compensatory award in unfair dismissal cases shall be such amount as the tribunal considers “just and equitable in all the circumstances having regard to the loss sustained by the complainant in consequence of the dismissal in so far as that loss is attributable to the employer”.
• Section 123 is the basis for a ‘Polkey’ reduction in compensation to reflect the chance that a person would have been fairly dismissed had a proper procedure been applied: Polkey v A E Dayton Services Ltd [1988] AC 344.
• HHJ Tayler found, at 12, that:

“An award consisting only of a redundancy payment would generally only be appropriate where there was a 100% chance that if a fair process had been applied the employee would have been fairly dismissed on the same date as the unfair dismissal took place. If a fair procedure would have taken some time there would be some compensation to cover the period that the consultation would have taken even if dismissal was inevitable.”

• There is a degree of speculation involved in determining the chance that a fair dismissal would have occurred absent any unfairness because, at 13-14:

“the employment tribunal has to recreate the world as it would have been for the employer and employee had a fair procedure been applied…

While the determination necessarily involves a degree of speculation, it must be based on evidence. The assessment is what the employer would have done if it had acted fairly, not what some other hypothetical fair employer would have done. The evidence should be considered with some circumspection, as a learning of experience is that employers are almost always adamant that dismissal was inevitable, while employees are equally certain that a fair procedure would have resulted in their retention in employment.”

• As to the requirements of a fair procedure, HHJ Tayler held at 16-17, 19:

“Warning and consultation are generally necessary components of a fair redundancy procedure” (citing the conclusions of the EAT in Williams and others v Compare Maxam Ltd [1982] ICR 156 at 162, in the context of unionised workplaces)

The process should generally start with some warning. In Williams two potential reasons for warning employees who are at risk of being dismissed by reason of redundancy were identified: the first to ensure that effective consultation can take place, including about the possibility of alternative work with the employer, and the second to give employees an opportunity to seek alternative employment with another employer. The importance of the former was consider in Elkouil v Coney Island Ltd [2002] IRLR 174 at [14]:

‘The warning, the giving notice of risk, that is spoken of there is an essential prerequisite of the consultation process, because without it the representatives of the employee will not be able to formulate a strategy or consider what suggestions they can put to the employer. In this case it is true that a single person was being made redundant and no union was involved, but the principles are exactly the same.’    

                        …some consultation will generally be required even for very small employers: De Grasse v Stockwell Tools Ltd [1992] IRLR 269 at [12]:

‘In our judgment while the size of the undertaking may affect the nature or formality of the consultation process, it cannot excuse the lack of any consultation at all. However informal the consultation may be, it should ordinarily take place.’

• HHJ Tayler noted that the authorities cited by the appellant establish the importance of having objective criteria to “prevent selection for redundancy being used as an opportunity to get rid of employees who are unwanted for some reason”, and there is a “similar risk where a pool of one is chosen”. Accordingly, at 21, HHJ Tayler stated:

‘there is good reason to examine a decision to choose a pool of one employee with worldly-wise care.’

• Further, HHJ Beard in Mogane v Bradford Teaching Hospitals NHS Foundation Trust [2022] EAT 139 recently emphasised the importance of consultation in circumstances in which the selection of a pool of one means that the claimant is effectively certain to be dismissed as redundant.

Judgment

• HHJ Tayler upheld all three grounds of appeal. His key finding was that the Employment Judge’s statement that “given that I have accepted that the [Claimant] could reasonably have been placed in a pool of one had Mr Dhaliwal put his mind to it, I consider that the redundancy would still have occurred when it did” meant that the Tribunal did not apply the relevant legal principles, as the reasoning involved a non-sequitur (i.e. that the possibility of being in a pool of one meant that dismissal could occur on the day it did without any fair procedure).
• The EAT found that the Tribunal’s reasoning failed to take into account the general requirement for some warning and consultation, even in the case of a small employer, and provided no explanation for this, as the authorities established was required. It appeared there were no clear exceptional circumstances, as the business continued and the other chefs were retained.
• Some warning and consultation could have resulted in the selection of a pool of more than one, and might have affected the choice of any selection criteria.
• The three grounds of appeal were upheld “as they all rest on the erroneous analysis that dismissal would necessarily have occurred and that any consultation would have made no difference”.

Anna Dannreuther represented the successful appellant at all stages of the litigation, including drafting the grounds of appeal.