The EAT has held that an employee’s dismissal for redundancy was unfair due to the absence of meaningful consultation at the formative stage of the redundancy process. This would have provided the opportunity to propose alternatives to redundancy and to influence the employer’s decision. When the employee appealed, the employer could not repair the gap of consultation in the formative stage which the EAT had identified.
Whether a dismissal for redundancy is fair:
- Depends on whether in the circumstances (including the size and administrative resources of the employer’s undertaking) the employer acted reasonably or unreasonably in treating redundancy as a sufficient reason for dismissing the employee.
- Shall be determined in accordance with equity and the substantial merits of the case.
(Section 98(4), Employment Rights Act 1996 (ERA 1996).)
The leading case on reasonableness in relation to redundancy is Polkey v A E Dayton Services Ltd  IRLR 503, in which the House of Lords held that an employer will normally not act reasonably (and a dismissal will therefore not be fair) unless it:
- Warns and consults its employees, or their representative(s), about the proposed redundancy.
- Adopts a fair basis on which to select for redundancy by identifying an appropriate pool from which to select potentially redundant employees and to make the selection against proper criteria.
- Searches for and, if it is available, offers suitable alternative employment within its organisation.
The key components of fair consultation were identified in R v British Coal Corporation and Secretary of State for Trade and Industry, ex parte Price  IRLR 72 as:
- Consultation when the proposals are still at a formative stage.
- Adequate information on which to respond.
- Adequate time in which to respond.
- Conscientious consideration of the response to the consultation.
In Williams and others v Compair Maxam Ltd  IRLR 83, the EAT held that where employees are represented by a recognised union, reasonable employers will usually seek to act in accordance with the following principles and depart from them only with good reason:
- Early warning. The employer will give as much warning as possible of impending redundancies so that the union and potentially affected employees can take early steps to inform themselves of the relevant facts and consider possible alternative solutions.
- Consultation with union. The employer will consult the union as to the best means by which the desired management result can be achieved fairly and with as little hardship to the employees as possible.
- Fair selection criteria and fair selection. The employer will seek to establish selection criteria which, so far as possible, can be objectively verified and to ensure that the selection is made fairly in accordance with those criteria.
- Consideration of alternative employment.