Servisair UK Ltd v O'Hare & Ors

For redundancy under section 139(1)(b) of the Employment Rights Act 1996, the tribunal must distinguish between a reduction in work and a reduction in the employer’s requirement for employees to perform work of a particular kind. The statutory inquiry has two stages: whether that requirement has ceased or diminished, and whether the dismissal was wholly or mainly attributable to that state of affairs.

A cost-saving aim, including replacing higher-paid employees with lower-paid employees doing the same work, does not by itself prevent a dismissal from being by reason of redundancy. A tribunal errs if it treats the continuing existence of the work as conclusive without deciding whether the required employee headcount has reduced.

Ten former dispatcher employees brought unfair dismissal claims against Servisair UK Ltd. The Employment Judge upheld their claims, holding that the employer had not established redundancy or another potentially fair reason for dismissal. The Judge therefore did not consider fairness under section 98(4) of the Employment Rights Act 1996.

The employer appealed. It contended that the Judge had asked whether the dispatch work had diminished, rather than whether its requirement for employees to perform that work had diminished. The appeal concerned the correct application of the redundancy definition and whether the causation issue had also been properly determined.

1. Appeal allowed. The Employment Judge misapplied section 139(1)(b) of the Employment Rights Act 1996. The statutory test, as stated in Murray v Foyle Meat Ltd [2000] 1 AC 51, asks first whether the employer’s requirement for employees to carry out work of a particular kind has diminished, and secondly whether the dismissal was wholly or mainly attributable to that state of affairs.

2. The first inquiry concerns a reduction in required employee headcount, not whether the work itself has disappeared or diminished. The Employment Judge misstated the test by asking whether the requirement for work of a particular kind had ceased or diminished. She then applied that erroneous formulation.

3. There was evidence capable of showing a proposed reduction in the number of dispatchers and in full-time posts. The Judge made no finding on that evidence. The fact that grade 4 and grade 5 dispatchers performed the same work did not answer the statutory question.

4. The causation conclusion could not stand because it rested upon the erroneous conclusion that there was no redundancy situation. An employer’s wish not to pay employees a higher rate for skills no longer needed may be cost-driven, but that motivation does not exclude redundancy where the statutory requirements are otherwise met.

5. The EAT could not itself determine that a redundancy situation existed because the necessary findings of fact had not been made. The case was remitted to a fresh Employment Tribunal to determine both the redundancy-situation and causation questions and, if necessary, fairness under section 98(4).

• Employment Appeal Tribunal: allowed the employer’s appeal and remitted the case for a fresh hearing.
• Employment Tribunal: Employment Judge Sage upheld the employees’ unfair dismissal claims, finding no potentially fair reason for dismissal.