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Walking a Tightrope: Fair Selection for Redundancy

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Redundancy occurs when employees are dismissed from their jobs for one or more reasons which are not directly related to the performance or behaviour of the individual. If an employee is dismissed due to redundancy the dismissal will not be deemed to be unfair provided that (1) there are substantial grounds justifying the dismissal (2) the selection process is fair, and (3) the employer’s conduct is reasonable.

If an employer does not observe these conditions there is a very strong likelihood that the redundancy could later be successfully challenged by the employee.  It is therefore vitally important that the selection process used is fair and transparent and is applied consistently across all roles in the selection pool.

When an employer is contemplating redundancies affecting a portion of the work force, the selection criteria to identify which roles are to become redundant is likely to be the single most difficult and complex issue to address.

So how does an employer go about selecting roles for redundancy?

The only viable choice of redundancy programme is to use a selection matrix.   However, the use of such a policy brings with it the risk of dealing with cases of unfair selection for redundancy.  So, employers need to tread carefully when using it – not least because case law is developing all the time in response to cases being brought against employers for unfair redundancies.  An example of this is “bumping” – where someone’s role is made redundant but they are moved into another person’s role – resulting in that other person being made redundant.

This had been thought to be an outdated practice in Ireland but in a recent decision the EAT found fault with an employer and ruled that “in failing to consult the claimant and explore the possibility of reverting him to his former position the respondent had not acted reasonably”.  In that case the claimant was awarded €40,000.  (Fines and awards can be up to 2 years salary.)  And the EAT in that determination also made reference to a 1980 ruling by the English Court of Appeal.  This gives a hint as to the complexity of what Irish employers may need to contend with.

With collective redundancies companies are obliged under Irish law (1977 Protection of Employment Act) to “initiate consultations with employees’ representatives representing the employees affected by the proposed redundancies”.  The same act defines a collective redundancy to apply when the number of employees to be dismissed reaches certain thresholds:

  1. 5+employees in an establishment employing 21-49 employees.
  2. 10+ employees in an establishment normally employing 50-99 employees.
  3. 10%+ of employees in an establishment normally employing 100-299 employees, and
  4. 30+ employees in an establishment normally employing 300 or more employees

The National Employment Rights Authority has produced a helpful paper providing background on the definition of collective redundancies and that also provides clear guidance to employers on their obligations.

So how then should a company go about devising a selection matrix that achieves its main goal of fairly identifying the roles to be made redundant while also avoiding exposing the employer to potential claims of unfair targeting?    The fundamental requirement is that any criteria used be objective and evidence-based.

One useful guideline is that competencies should be as specific as possible.  For example, “attitude” would be a weak criterion to use as it is ambiguous.  Qualifications, in contrast, allow a universally clear interpretation.  A company might rank a Ph.D. ahead of a Masters, a Masters ahead of a Degree and a Degree ahead of a Diploma.  If points were awarded to the highest qualification achieved then a natural ranking of individuals would emerge.  However it would be too restrictive to use qualifications as the sole criterion.  For example imagine if a group of engineers all had the same Masters level qualification.  Obviously some other criteria would be needed for the selection matrix.

If the employer has a performance appraisal system then elements of that might be usable in devising the selection matrix.  As with the above “attitude” example though care is necessary here as performance appraisal systems can include performance criteria that, while legitimate for the purpose of performance appraisal, are too nebulous for a selection matrix.  “Initiative” is a good example.  A manager and their team members can have a shared understanding of what initiative means in the context of performance but “initiative” as a criterion for a selection matrix is arguably too vague.

Even if an employer has defined clear and numerically based selection criteria they might still be dangerous.  For example, employers cannot use an element of performance as a criterion unless there is a pre-existing record of how the employees have performed.  Sales is an example – where there might be pre-existing sales figures for the different employees.

As with performance appraisal systems, employers may wish to weight different elements of the matrix differently, for example adding more weight to sales performance than to qualifications.  Such weighting is allowable and may be a valuable mechanism to allow the employer to objectively identify in a nuanced way the relative contributions of different employees.  But the simpler the better with any such weighting so as to ensure less headaches for the EAT in any future potential examination of the employer’s redundancy procedure.

Obviously the criteria used in the matrix cannot include any measure that is discriminatory, for example, absences due to disability or pregnancy.  But even here care is needed to avoid any claim of discrimination.  It would be wise to not include any absence-based criteria unless there are no others that can be used.  And, if sickness is to be used, employers need to be careful that an employee thereby affected cannot say that the “sickness” is actually due to some manner of disability.    So it is not sufficient for employers to avoid the standard areas such as gender, age, race, etc. as grounds for redundancy.

If a company thinks that it is in their best interest to use a selection matrix as the basis for a redundancy programme, it would be foolhardy of them to make a choice between the selection matrix and LIFO without getting professional advice.  There is no simple one size fits all solution – and the area is a potential minefield unless guidance is sought on how to navigate it.

Do not leave your business exposed to unnecessary compensation claims and costly legal fees. Our experienced HR Consultants understand the legal complexities involved in handling individual and collective redundancies.

To find out more about our redundancy management services, or to talk to one of our consultants in confidence about a staffing situation, call Mary Cullen, Patrick Foley or Liam Barton on 056 770 1060 or email mcullen@insighthr.ie

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