Sham Redundancies: Employers beware 

June, 2022 - Shoosmiths LLP

In a recent case the Employment Appeal Tribunal (EAT) upheld a 25% uplift to compensation for an employer’s failure to comply with the ACAS Code of Practice, following a discriminatory dismissal that was purportedly due to redundancy.


In a recent case, the Employment Appeal Tribunal (EAT) upheld a 25% uplift to compensation for an employer’s failure to comply with the Advisory, Conciliation and Arbitration Service (ACAS) Code of Practice, (Code) following a discriminatory dismissal that was purportedly due to redundancy.


Facts and decision

By way of background, the ACAS Code of Practice on disciplinary and grievance procedures sets out the minimum steps that an employer should follow when handling a grievance or disciplinary matter for poor performance or misconduct, and failure to comply with the Code can result in compensatory awards being uplifted by the tribunal by up to 25%. The Code explicitly states that it does not apply to redundancy dismissals.


However, the case of Rentplus UK Ltd v Coulson [2022] EAT 81, provides a cautionary tale for employers.


Ms Coulson was employed by Rentplus UK Ltd (Company) in a senior role. She was made redundant by the Company following a reorganisation in August 2018. She raised a grievance prior to her dismissal, in which she complained that her role wasn’t redundant as the number of staff actually increased after the reorganisation, and that she had been marginalised by the Company’s new CEO. Her grievance and eventual grievance appeal were not upheld. She brought claims of unfair dismissal and direct sex discrimination.


The employment tribunal found that Ms Coulson’s dismissal was unfair. The tribunal determined that the real reason for her dismissal was actually a desire to remove her from her role, and that her role was not in fact redundant. In reaching these conclusions, the tribunal were influenced by the fact that the CEO knew before his appointment in 2017 that Ms Coulson’s role was to go. In the interim, he failed to maintain regular communication with her and left her out of key recruitment decisions and office initiatives (leading the tribunal to comment that she had been “systematically ignored”). Ms Coulson’s dismissal was justified as a cost cutting exercise, but the reorganisation resulted in a larger headcount and her role was carved up between some of the new recruits. The consultation process was also a sham (for example, the CEO promised but failed to arrange meetings with Ms Coulson). The tribunal also took into account that the new CEO was the real decision maker in her grievance, for example the appeal manager disclosed to Ms Coulson during the appeal process that she had been dealing with the CEO (despite the fact that the grievance was against him).


The tribunal was therefore able to infer that she had been subjected to sex discrimination. In addition, as redundancy was not the real reason for her dismissal, the Code did apply and had not been followed. The tribunal concluded that a 25% ACAS uplift should be awarded to reflect the Company’s failure to comply with the Code.
The Company appealed the decision, arguing that the tribunal had erred by concluding that the Code applied where the Company’s reason for dismissal was redundancy even though the tribunal found the reason for the dismissal was sex discrimination.


The EAT upheld the tribunal’s decision and dismissed the appeal. It found that there was no error of law in awarding an uplift of 25%, as both the redundancy dismissal and grievance processes had been a sham. The EAT commented that an employer cannot avoid complying with the Code by presenting their reasons for dismissal as something other than performance or misconduct. It also clarified that any issues with an employee’s conduct or capability, even if they are a result of discriminatory assumptions, will still be deemed a disciplinary situation to which the Code applies.


Comment

The case is a useful reminder that tribunals will look behind the label an employer applies to a dismissal, and that the ACAS Code can apply even in cases which are not obviously related to disciplinaries or grievances.
Employers are therefore encouraged in all cases to consider if the ACAS Code may apply, and in any event to err on the side of caution by structuring any dismissal process so that it is in line with the Code. 


 

 



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