Lesney Products & Co Ltd v Nolan

Employers may reorganise working arrangements to improve efficiency, reduce overtime or save costs without creating entitlement to redundancy payments. The question is whether dismissal is attributable to the statutory fact that the business requirements for employees to carry out work of a particular kind have ceased or diminished. The relevant work must be identified by reference to the work actually required, rather than former hours, overtime or earnings. Where the same number of employees remains required to perform the same amount of work, changing one long shift with overtime into two shorter shifts is not, by itself, redundancy. The employer bears the statutory burden of proving the contrary reason for dismissal.

The employer reorganised work at its factory. A single day shift of machine setters, supported by substantial overtime, was replaced by two overlapping day shifts. The same number of machine setters was required, and the same amount of work was performed on the day shifts, although overtime and average earnings fell.

Nine machine setters who refused the new arrangements were dismissed. Six claimed redundancy payments under section 1(2)(b) of the Redundancy Act 1965. Employment tribunals found in favour of the employees. The Employment Appeal Tribunal declined to interfere, although it identified difficulties in the tribunals’ reasoning and granted leave to appeal. The central issue was whether the dismissals were attributable to a diminution in the business requirement for machine-setter work.

1. Appeal allowed with costs. The dismissals were not attributable to a diminution in the business requirement for machine-setter work. The employer proved that the dismissals occurred because the employees refused the reorganised shift arrangements, satisfying the statutory burden.
2. Per the Master of the Rolls, the expression “a redundancy situation” is shorthand and must be tested against the statutory words. The relevant question is whether the requirements of the business for employees to carry out work of a particular kind have ceased or diminished. The approach in Johnson v Nottingham Combined Police Authority (1974) 1 Weekly Law Reports 358 was applied, but the shorthand was explained as potentially misleading if detached from the statutory test.
3. The evidence showed that the day shifts continued to produce the same amount of work, the employer still required all 36 machine setters, and replacement employees were sought. The reduction in overtime and earnings therefore did not establish redundancy.
4. Lord Justice Stephenson agreed that the redundancy situation had been dealt with by abolishing the night shift, distinguishing that position from the later dismissal of day-shift setters who refused the new system. Lord Justice Shaw considered that the tribunals had relied partly on conjecture and had been misdirected by unchallenged work schedules showing that the employer had discharged the onus.

• Court of Appeal: Allowed Lesney Products Ltd’s appeal with costs and reversed the Employment Appeal Tribunal’s refusal to interfere with the tribunals’ awards of redundancy payments.
• Employment Appeal Tribunal: Considered the tribunal decisions difficult to understand but declined to interfere, having regard to the employer’s statutory burden of proof, and granted leave to appeal.
• Employment tribunals: Found in favour of the machine setters’ claims for redundancy payments.