Key Organics Ltd v Billington

Failure to comply with step 2 of the Standard Procedure under the Employment Act 2002 makes a dismissal automatically unfair. An employee must be told not only why a redundancy situation exists, but also why his or her particular job has been selected, so that meaningful representations can be made.

In assessing compensation, a tribunal must explain clearly the alternative employment chance it has identified and the evidential basis for any percentage assessment. Where its reasoning does not disclose whether it relied on an existing vacancy, a modified role or the creation of a new job, the assessment should be remitted.

Dr Philip Billington, an executive director employed by Key Organics Ltd, was dismissed for redundancy after the company’s managing director proposed removing his operational role and distributing its functions among other employees. The Employment Tribunal found the dismissal ordinarily unfair because there had been no meaningful consultation, but held that the statutory Standard Procedure had been completed. It assessed a 25% chance that Dr Billington would have remained in employment in a lower-paid role.

Dr Billington cross-appealed on automatic unfairness. The company appealed against the compensation assessment and argued that the Tribunal should have considered the effect of section 98A(2) of the Employment Rights Act 1996.

1. Cross-appeal allowed. The Employment Tribunal had not addressed the statutory question under step 2 of the Standard Procedure: whether, before the meeting, the company had informed Dr Billington of the basis for stating that he was at risk of redundancy.
2. Knowledge that management was excessive and that savings were required was insufficient. Because Dr Billington’s work remained necessary, he had to be told why his job was selected and how his work was to be divided. Without that information he could not make informed representations. The failure meant that the dismissal was automatically unfair under section 98A(1) of the Employment Rights Act 1996.
3. The Tribunal’s reasoning on section 98A(2) did not require determination. The Appeal Tribunal accepted that the relevant observation in Alexander v Bridgen Enterprises was obiter and declined to add further obiter commentary on the meaning of the repealed provision. The provisional consideration of Hansard provided no assistance.
4. The company’s appeal on the Polkey compensation issue was allowed. The Tribunal had not explained what employment opportunity generated the assessed 25% chance or why the evidence supported it. The issue was remitted for rehearing, with guidance to apply Software 2000 Ltd v Andrews and to take account of Virgin Media Ltd v Seddington & Eland.
5. Remission was to the same Tribunal. The Appeal Tribunal applied the guidance in Sinclair Roche Temperley v Heard and considered the Tribunal capable of reconsidering the issue fairly and professionally.

• Employment Tribunal: held that the dismissal was ordinarily unfair, but not automatically unfair, and assessed a 25% chance of continued employment at £45,000 per annum.
• Employment Appeal Tribunal: declared the dismissal automatically unfair under section 98A(1) of the Employment Rights Act 1996; allowed the company’s appeal only on the Polkey assessment and remitted that issue to the same Tribunal.