Campbell v Tesco Personal Finance PLC – Redundancy: restructure 2023
In these challenging times it is unfortunate that many businesses will face the possibility of making employees redundant. This is often a difficult decision, and never taken lightly with employers seeing this as a last resort to protect their businesses and organisations long term.
However, the above recent case published 2nd May 2023 served as an important reminder for employers of the need to always return to the wording of the law, and only progress with a redundancy dismissal where there is a genuine cessation or diminution of work of a particular kind. This can be difficult to establish, especially where a restructure means the number of teams reduce and additional responsibilities are added to job roles.
Following the outcome in this case, it is clear that the test to be applied, regardless of how teams around it are organised, is whether or not the work of the pre-restructure post has either stopped entirely or diminished post-restructure, or if it continues to need to be done.
When making redundancies in the course of a restructure, employers must establish that the ‘work of a particular kind’ has genuinely ceased or diminished before concluding that a redundancy is necessary. It is not sufficient evidence to show the amalgamation of teams and the addition of functions to an existing post; employers must show there is less work of a particular kind.
LAW
Section 139 Employment Rights Act 1996 (ERA) (as is relevant to this case):
(1) For the purposes of this Act an employee who is dismissed shall be taken to be dismissed by reason of redundancy if the dismissal is wholly or mainly attributable to —
… (b) the fact that the requirements of that business —
(i) for employees to carry out work of a particular kind, … have ceased or diminished or are expected to cease or diminish.
Murray v. Foyle Meats Ltd [1999]
The House of Lords emphasised the importance of applying the unvarnished words of the statute to the issue of whether or not a redundancy situation exists. The relevant question for the purposes of section 139 ERA is whether the requirements of the employer for employees to carry out work of a particular kind have ceased or diminished.
Packman v. Fauchon [2012]
A redundancy situation can arise from a re-organisation which enables the same amount of work to be performed by fewer employees or within a shorter number of working hours.
FACTS
The claimant worked for the respondent between March 2010 and August 2019 as a Risk Manager. Prior to her dismissal, the respondent operated three risk teams, Commercial Risk, Customer Risk and CIO Risk. The appellant worked within the respondent’s Commercial Risk team.
A review of the business was undertaken in 2018 with a view to cost savings. A decision was made to consolidate within the risk function and have only two teams moving forwards. One of the teams would continue as before, and from the other two a new team would be created. This left the claimant and another risk manager at risk of redundancy.
In the new structure, there was a new Centralised Controls Testing Team, which had within in it one new position of Lead Risk Manager and another post of Risk Manager. The claimant understood at the time that a redundancy was necessary because only one person was needed to lead the team. The other post of risk manager would be a vacancy that needed to be filled.
A selection process was carried out, and a scoring matrix used. The claimant scored the lowest, and despite her attempt to challenge her score, she was dismissed as redundant in August 2019.
A claim of unfair dismissal was raised.
EMPLOYMENT TRIBUNAL (ET)
The claimant argued that that the that redundancy was not “procedurally fair, genuine, adequate or effective”. This was because the number of risk managers remained the same after the re-structure as before.
However, in assessing this claim, the ET did not directly ask itself if the redundancy was indeed a genuine exercise or not, despite section 98 of the ERA putting the burden on the respondent to prove that it was.
The ET ultimately found that the two risk manager posts under the old structure had been replaced by two new risk manager posts within the new structure, one of which had a leadership function. In those circumstances, it was held held that there was a redundancy situation, that the reasons for the dismissal was redundancy and that the dismissal was fair.
This was appealed.
EMPLOYMENT APPEAL TRIBUNAL (EAT)
On appeal, the EAT asked the ET the following questions in order to clarify its reasoning. These are extracted from the judgment below:
- “What was the basis for the Tribunal’s finding that the impact of the re-structuring exercise was a reduction in the number of Risk Managers from three to two?”
The ET responded that there were three Risk teams in three areas of the business, to be reduced to two following the reorganisation.
- “On what basis did the Tribunal conclude that a redundancy situation existed within the part of the restructuring process that involved the claimant …?”
The ET concluded there was a redundancy situation because the “old” structure of the teams was deleted.
- “Specifically, since the selection ‘pool’ under consideration comprised only [of two Risk managers], and two risk manager vacancies existed in the new structure, on what basis did the Tribunal conclude that a redundancy situation (in terms of section 139 ERA) arose?”
The answer to this question was on similar lines to the above, with the ET pointing to the deletion of the old structure of three teams creating the need to place the claimant and another Risk Manager at risk of redundancy, should no suitable alternative employment be found.
The ET went on to say that in the new structure, suitable alternative employment did exist, with one role of Lead Risk Manager and one role of Risk Manager. However, it was not possible to match the two risk managers to the new posts because they were not the same as their old posts; one was more senior than the other and required the post-holder to “lead the team”. Therefore, the ET concluded, the claimant was made redundant because her post was deleted from the structure.
The EAT rejected the reasoning of the ET above, by focusing on the “unvarnished words of the statute”, specifically section 139 ERA, where it required of the employer “for employees to carry out work of a particular kind have ceased or diminished.”.
The EAT acknowledged that there is not always the need for a reduction in headcount for there to be a redundancy, nor that there need be a diminution in the amount of work, when the result of a reorganisation is that the same amount of work can be performed by fewer employees or within shorter working hours. However, it was essential to return to the words of section 139 and for the ET to consider whether or not they genuinely applied to the case.
In upholding the appeal and remitting the case to a fresh ET for further consideration, the EAT held that the original ET had erred in law in not properly applying the statutory test for redundancy, as it was not enough that one of the new roles had a leadership function. The ET had failed to assess whether or not the amount of risk management work had ceased or diminished, and instead focused solely on the reduction in the number of team.
How we can help
At S.E. Hunter Associates Limited we can help to navigate the legal obligations concerning redundancy and help to ensure that employers do not fall down the many potential pitfalls that can emerge.
Some of the services we offer that can help with this include:
- Management of full consultation for making redundancies;
- Formation of redundancy toolkits and checklists;
- Management of all written correspondence;
- Provide face to face meetings to support both to the employee and employer;
- Management of any resulting grievances or appeals;
- Creation and implementation of a redundancy policy.
If you would like to discuss any of the above, please don’t hesitate to get in touch with us, either by mailing info@sehunterassociates.co.uk or calling 07838184094.