Two recent redundancy cases in the Employment Appeal Tribunal (EAT) have considered when a pool of one can be fair. In Halpin v Sandpiper Books Ltd the pool was found to be fair when the employer was ceasing its operations in China and the claimant was the only employee working there. It was, however, found to be unfair in Capita Hartshead Ltd v Byard on the basis that the employer had not genuinely applied its mind to the issue of who should be in the pool.
Before carrying out a redundancy selection process, an employer must consider what the appropriate pool of employees for selection should be. Employers have a wide measure of flexibility and can choose a redundancy pool that is the same size as the number of redundancies to be made. However, employers must be careful when doing so as tribunals will carefully scrutinise such an approach.
The following principles apply when a tribunal is asked to decide on the fairness of a selection pool:
- there are no fixed rules about how the employer should define the pool;
- in deciding whether a redundancy was fair, a tribunal must not simply substitute its own view as to what the pool should have been;
- a tribunal should consider whether the pool chosen by the employer was within the range of reasonable responses;
- it is difficult (but not impossible) to challenge the employer's choice of pool if it has "genuinely applied its mind" to the decision;
- where the pool is only one employee (or is the same size as the number of redundant jobs) tribunals are likely to look more carefully at whether the choice of pool is reasonable.
HALPIN v SANDPIPER BOOKS LTD
Sandpiper Books Ltd is a book distributor which originally employed Mr Halpin in the UK to do administrative and analysis work. He was posted to China after the company decided to expand its market there. When Sandpiper decided to outsource the work to local book agents in China, Mr Halpin's role became at risk of redundancy. He was included in a pool of one on the basis that he had a unique position. Following a consultation process, Mr Halpin was made redundant and claimed unfair dismissal. He argued that other employees with interchangeable skills should have been included in the pool and that no reasonable employer would have limited the pool to one employee.
The unfair dismissal claim failed. The tribunal concluded that Mr Halpin had been fairly selected for redundancy "in so far as he was in a pool of one given his unique position dealing solely with sales and based in China".
The EAT agreed. The decision to limit the pool to one employee was reasonable. Decisions in relation to redundancy selection are for management and cannot be easily overturned by a tribunal. "Selection only operates, when fairness is concerned, where there is a number of similarly qualified possible targets for redundancy." Here, there were no other "similarly qualified possible targets" and so a pool of one was appropriate.
CAPITA HARTSHEAD LTD v BYARD
Ms Byard was employed by Capita Hartshead Ltd as one of four actuaries, each actuary managing a number of pension funds. Capita lost a number of Ms Byard's clients. When it failed to obtain new work for her it decided to implement a redundancy process. It was only her work that had diminished - the other actuaries' work had not.
Capita decided that a pool consisting of just Ms Byard was "feasible and responsible" in the circumstances and went through an individual consultation process with her. She was made redundant and claimed unfair dismissal.
The tribunal and the EAT found that Ms Byard had been unfairly dismissed:
- Capita had not genuinely applied its mind to the issue of who should be in the pool
- Capita's decision to limit the size of the pool to one was not reasonable and the other actuaries should have been included as they did similar work. Having a pool of one "took a lot of the value away from the resultant consultation period"
- There was no evidence that it was reasonable for Capita to find that having a wider pool would have been useless and that Ms Byard would almost certainly have been selected for redundancy in any event
- Capita argued that it would lose business if the actuaries working for individual clients were changed but this risk was only found to be "slight".
It can be tempting for employers to take the view that there is only one employee in the selection pool as this prevents demoralising other employees (by removing them from the selection process entirely) and avoids the need for scoring and selection. However, these EAT decisions are a reminder to employers that selecting a pool that is the same size as the number of roles to be made redundant is likely to come under particular scrutiny. They must "genuinely apply" their mind to the issue; avoid overstating the commercial risks of a wider pool; and only go down this route if there are strong reasons for that choice. Records should be kept of the decision-making process and the reasons for using a pool of one should be explained during consultation with the employee.
The Sandpiper decision is clearly more pro-employer than the Capita decision. However, this is perhaps not surprising as the facts of Sandpiper fit into one of the "classic" pool of one situations:
- an employee is in a unique position that is disappearing
- a number of employees are doing similar roles but each within a specific geographical area and there is a no longer a need for that role in one of the areas
Halpin v Sandpiper Books Ltd UKEAT/0171/11
Capita Hartshead Ltd v Byard UKEAT/0445/11