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Redundancy – Selection Pools

Napthens - February 29th 2012

Capita Hartshead Ltd v Byard
In the recent case of Capita Hartshead Ltd v Byard the Employment Appeal Tribunal (“EAT”) has upheld a decision that a redundancy dismissal was unfair where the employer used a selection pool of one employee.

Mrs Byard (“B”) was employed by Capita Hartshead Ltd (“the Company”) as one of four actuaries. Each actuary managed a number of pension funds. B no longer had enough work for a full time role as many of the pension schemes she had worked on had either been wound up or the clients had been lost. The Company decided to consider a redundancy and placed B in a selection pool of one. The Company stated a pool of one was appropriate because although there were three other actuaries, scheme actuary appointments are personal appointments required by law and there was a risk of losing clients if they were transferred between actuaries. B was made redundant and pursued a claim for unfair dismissal.

The EAT held that the decision to limit the size of the pool to B only was unfair. It concluded that the Company had not genuinely applied its mind to the issue of who should be in the pool and failed to have regard to the fact that:

  • The other actuaries did similar work
  • B’s work had been praised and
  • The risk that the Company would lose business was “slight”, on the basis that it knew of cases where the actuary has changed without the Company losing the client.

The EAT helpfully set out the applicable principles in unfair dismissal claims when assessing whether the correct redundancy selection pool had been used:

  • It is not a tribunal's function to decide whether they would have thought it fairer to act in some other way: the question is whether the dismissal lay within the range of conduct that a reasonable employer could have adopted - Williams v Compair Maxam Limited 1982 IRLR 83
  • The 'reasonable response' test is applicable to the selection of the pool from which the redundancies are to be drawn - Hendy Banks City Print Limited v Fairbrother and ors EAT 0691/04
  • There is no legal requirement that a pool should be limited to employees doing the same or similar work. The question of how the pool should be defined is primarily a matter for the employer to determine and it will be difficult for the employee to challenge it where the employer has genuinely applied his mind to the problem - Taymech v Ryan EAT 663/94
  • The tribunal is entitled, if not obliged, to consider with care and scrutinise carefully the reasoning of the employer to determine if he has 'genuinely applied' his mind to the issue of who should be in the pool for consideration for redundancy; and that
  • Even if the employer has genuinely applied his mind to the issue of who should be in the pool for consideration for redundancy, then it will be difficult, but not impossible, for an employee to challenge it.

What does this mean?
If, when carrying out a redundancy exercise, a proposed selection pool is the same size as the number of roles to be made redundant, an employer should ensure it has sound reasons for that choice. Even an employer that has “genuinely applied its mind” to the problem of selecting a pool can be found to have acted unfairly.