The risk of holding a “sham” redundancy procedure

In the recent case of Rentplus UK v Coulson, the Employment Appeal Tribunal (“EAT”) upheld the Tribunal’s earlier decision to award a 25% uplift to the compensation award for failure to comply with the Acas Code of Practice on Disciplinary and Grievance Procedures. The Tribunal had concluded strongly that “the dismissal process was a total sham, that dismissal was pre-determined and that there was absolutely nothing that the Claimant could say to prevent her dismissal.”

This case should be a clear warning to all employers that “going through the motions” will not be sufficient to avoid an unfair dismissal claim. When seeking to make a dismissal on the grounds of “redundancy” you need to engage with the consultation process and demonstrate that you have genuinely considered if there is in fact a redundancy situation, or if there is another reason behind the dismissal. 

Background to the case

The Claimant employee, Ms Coulson, was employed by the Respondent employer, Rentplus UK Ltd (“Rentplus”), from 2015. Unbeknownst to her, in 2017 a decision was taken to dismiss Ms Coulson. In 2018 Rentplus began a reorganisation, which despite increasing the number of roles in the company, led to the decision to make Ms Coulson redundant. Rentplus held consultation meetings with Ms Coulson about the redundancy after which Ms Coulson submitted a grievance, asserting that the assessment of her role as redundant was not an accurate assessment of what was proposed and in actuality the CEO, Mr Collins, was continuing to marginalise her as he had done so since his appointment in 2017. 

Ms Coulson’s grievance and subsequent appeal of the grievance decision were dismissed and she was given notice of dismissal by reason of redundancy. She subsequently brought a claim for unfair dismissal and sex discrimination which was concluded in her favour, as the Tribunal found the reason for her dismissal was unfair. The consultation meetings were found to be a sham and it was further found that there were facts from which sex discrimination could be inferred, which Rentplus had not sufficiently disproven. 

What is an Acas Uplift? 

Section 207A of the Trade Union and Labour Relations (Consolidation) Act 1992 gives Tribunals a discretion to increase or reduce awards by up to 25% where either party has unreasonably failed to comply with the relevant Acas Code of Practice. 

What is the relevant Acas Code? And when does it apply?

Employers are required to have regard to the Acas Code of Practice on Disciplinary and Grievance Procedures (the “Code”) which applies to “disciplinary situations”, a concept which includes situations where employers are considering a dismissal for poor performance or misconduct but explicitly excludes dismissals for reasons of redundancy or the non-renewal of a fixed-term contract.

One of the grounds of Rentplus’ appeal was that the Tribunal erred in law for concluding that the Acas uplift should apply to the case, as the reason they gave for dismissal was redundancy, and the reason found by the Tribunal was sex discrimination. So why was this Code applied to a purported redundancy situation?

Ms Coulson raised a grievance and so the Code would have applied for that reason alone, but it was also found that the redundancy was a complete sham as dismissal was pre-determined long before the redundancy process was initiated and the real reason to dismiss her related to a desire to remove Ms Coulson personally. The EAT opined that an employer cannot sidestep the application of the Code by “dressing up a dismissal that results from concerns that an employee is guilty of misconduct, or is rendering poor performance, by pretending that it is for some other reason such as redundancy”.

The judgement further advised that a finding of unlawful discrimination will not preclude the application of the Code. If an employer considers there is an issue with an employee’s conduct or capability, but part of that consideration is the result of discriminatory assumptions, the Code will still apply as it is still within the context of a disciplinary situation.

How do Tribunals decide the percentage of uplift that is awarded?

To date there has been no specific guidance which spells out exactly for example if an employer acts in such a way they will get X% uplift or if they act in such other way they will get Y% uplift. As you will generally find in the law, each case will turn on its own facts. Previous cases provide some guidance as to how a Tribunal will come to a decision on what the percentage of the uplift should be. For example Tribunals should consider the amount that a percentage uplift would produce before deciding the percentage should apply (Wardle v Credit Agricole Corporate and Investment Bank [2011]). Where the underlying award is for an already a significant amount it would be an error of law not to consider the financial impact of the uplift on the overall award figure as the Tribunal has a duty to be just and equitable to both parties. In this case, the Tribunal did not provide much explanation as to why it awarded the full 25% uplift, only that the failures of the company were “so egregious” that “an uplift in compensation of 25% was required”.

What is the significance of the EAT’s judgement?

The judgement demonstrates that an Employment Tribunal will always endeavour to uncover the material truth of the reason behind a dismissal, regardless of the label the employer will assign to it. Careful consideration will be made as to whether the employer has acted in good faith and if found to be at fault, the Acas uplift is an example of just one penalty that may be applied. For guidance on what is the best practice and procedure to follow when considering the dismissal of an employee, get in touch with a member of the Moore Barlow Employment Team and we can walk you through it.

How Moore Barlow can help

Whatever the situation, our expert team can give you the information and advice you need to regain a sense of control and make the right decisions. We will help you assess your options and advise you on how to negotiate and secure the best possible result. Get in touch with our employment lawyers to discuss your case.