Employment rights and commercial reality

Posted: 04/12/2024

With the new government’s wave of employment legislation, there is understandably some fear about ‘day one’ rights and how much protection the proposed unfair dismissal probation period will give to an employer.

Employment law often seems daunting for employers. Employment tribunals were set up to hear claims from employees, not employers, and at first glance it might seem that the deck is stacked in favour of the former. All an employer can do is defend itself against the various claims brought against it. It is important, though, not to forget the respect and understanding for commercial reality that the employment tribunal so often shows at an actual hearing. 

A recent case, Carnival PLC v Laura Hunter [2024] EAT 167, concerning a redundancy situation, illustrates this well. The Employment Appeal Tribunal (EAT) overruled a decision from the first instance tribunal that a dismissal was unfair because that tribunal had disagreed with the employer’s redundancy scoring system. The first instance tribunal had analysed the scoring, and looked at the marking and the possibilities that would have arisen had it been done differently. The EAT found that the tribunal had made the fundamental error of substituting its own reasoning, that of a legal assessment months after the event, for the commercial assessment carried out by the employer at the time. In short, it got too involved. As a well-known 2010 Court of Appeal (CA) case said:

‘…the Tribunal is not entitled to embark on a reassessment exercise… it is sufficient for the employer to show that [it] set up a good system of selection and that it was fairly administered. Ordinarily there will be no need for the employer to justify the assessments on which the selection for redundancy was based’.

It always makes sense for an employer to go beyond this so that the redundancy pools, scoring, and selection stand up to scrutiny, but a tribunal is not entitled to re-score. Indeed, this principle is seen throughout the law of unfair dismissal, namely, a tribunal cannot substitute its own opinion for that of the employer in determining whether certain decisions are reasonable or not. 

The Carnival case also reminds us of the limitations of redundancy protection given to pregnant women and those on maternity leave. Under regulation 10 of the Maternity and Parental Leave etc Regulations 1999, a pregnant woman, or a woman on maternity leave, must be offered any 'suitable available vacancy' that exists within the employer. In this case, the tribunal fell into the trap of confusing a redundancy selection process with the availability of alternative 'vacancies'. Here, Carnival had decided to select five team leaders for redundancy out of a total pool of 21. At first glance, it is understandable how the tribunal interpreted the 16 remaining employees as occupying vacancies. They had not been selected for a redundancy and were safe in their roles. However, that is not a ‘vacancy’. A vacancy is where a new alternative position arises. 

Regulation 10 is simple. It offers no protection to a pregnant employee or one on maternity leave from selection out of a redundancy pool. They must not automatically be ranked higher than others. If, however, there is alternative employment in the employer’s organisation, then the protection under regulation 10 applies. This is perhaps best illustrated in the quite common position where two people hold similar roles, both of which are abolished, and they then compete for a single new role being created. As that role is new, it is a vacancy, and under regulation 10, it must be offered to the pregnant employee/person on maternity leave. If, however, just one of the two roles is selected for abolition, regulation 10 will not apply.

Similarly, the 2023 case of Joseph De Bank Haycocks v ADP RPO Limited shows the CA correcting a prescriptive approach by the EAT towards a small-scale redundancy exercise. The EAT had suggested that, in these days of reduced trade union involvement, an employer should generally consult with the workforce before embarking on a redundancy programme, and only score those people in selection pools after the consultation has begun. Such a journey to past industrial practice would prohibit the now common process of first provisionally scoring employees and only consulting with those still at risk, so as to avoid wider disquiet and unsettling the whole workforce. 

Thankfully the CA overruled the EAT. While consultation must cover all issues, including the reasons for the redundancy (and not just those relating to the individual provisionally selected), there is no requirement to involve the whole workforce. Further, so long as the employer keeps an open mind and is prepared to correct its process and re-score, scoring can precede consultation. 

Of course, no employer wants to be proved right in an employment tribunal judgment if the claim could have been avoided in the first place. The uncertainty caused by the new employment protection legislation is well placed. However, what these two cases show is that employers will have good grounds to reject allegations from employees that fail to acknowledge the commercial reality of their situation. Sometimes aggrieved employees need to be reminded of the approach the employment tribunal will take.

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