United Kingdom Employment Appeal Tribunal

(a) The decision of the Respondent to limit the size of the pool from whom the candidate for redundancy would be selected would comprise solely the Claimant was unfair as there were other actuaries who could have been included in the pool. An additional reason for regarding the pool of one as being unfair was that it “took a lot of value away from the resultant consultation period activated by the claimant being told that she was at risk of redundancy but in a pool of one” [68];

(b) There was no evidence on which the Employment Tribunal could have decided that the Respondent “could reasonably have concluded in the light of the circumstances known to them at the time of dismissal that adopting a fair selection procedure and entailing a pool of three or more actuaries would have been utterly useless and that the dismissal of the claimant would almost certainly have followed” [71]; and

(c) The Claimant was therefore unfairly dismissed. Her compensation had to reduce by one-third to take account of the chance that she would not have received it and so she was awarded £66,200.

The facts found by the Employment Tribunal

(a) The Claimant who is an Actuary started work with Aspen (Actuaries & Pension Consultants) PLC on 20 November 2010.  Her contract of employment was transferred to the Respondent in September 2007 and she worked for them until her dismissal on 11 December 2009;

(b) The Claimant’s line manager before and after the transfer of her employment to the Respondent was Mr Malcolm Pearce, another Actuary, who sits on the Senior Executive Board of the Respondent. The Claimant and Mr Pearce operated in Ludgate House, 245 Blackfriars Road London SE1 together with two other actuaries Mr Eran Winkler and Mr David Spreckley;

(c) The 2009 client list of the Respondent showed that Mr Winkler advised on assets worth some £117 million and Mr Spreckley’s portfolio covered assets worth in the region of £42 million, while the Claimant and Mr Pearce advised on funds worth £73 million and £41 million respectively;

(d) In about May 2009, it became apparent that the number of clients for whom the Claimant acted as Scheme Actuary was likely to diminish and she was only going to be left with three or four clients whose pension assets totalled some £6 million.  Mr Winkler acquired as a client in March 2009 the Royal College of Physicians (“RCP”) Pension Fund worth £10 million in asset value while Mr Spreckley acquired in May and June 2009 two other clients who increased the assets under his remit by some £2 million.  In 2009, Mr Pearce lost one of his clients which led to a reduction in the assets of the funds on which he was advising by £1 million. About 75% of the Claimant’s chargeable work would be clients within her Scheme Actuary portfolio, although she did some other consultancy work;

(e) The Claimant did not attribute the reduction in the number of the Claimant’s clients to any misfeasance or lack of performance on her part and the Respondent at the hearing “has gone out of its way to praise the technical ability that she demonstrated in her job and to acknowledge that she was a good and conscientious worker” [8];

(f) When the Respondent pitched for work from a prospective client, one or other of the Respondent’s Actuaries might have been proposed by the Respondent to be the Scheme Actuary, but if the proposed Actuary did not suit a particular client, the Respondent was then prepared to substitute another actuary as the proposed Scheme Actuary.  The client could vary their choice from time to time and a Scheme Actuary could be replaced because, for example of his or her long-term absence;

(g) In July 2008, the Respondents made a proposal to the RCP which resulted in the Claimant and a Mr Cosgrove being involved in the presentation.  Although Mr Cosgrove told the Claimant that he thought that she had struck up a good rapport with the Pensions Manager representing RCP, this was not borne out in the report made by the Pensions Manager of the RCP to Mr Pearce because the RCP did not consider that the Claimant had the right communication skills with which to impress the Trustees of his Pension Fund.  RCP made it clear that the appointment of the Respondent for business was dependent upon the Respondent putting forward Mr Winkler as the Scheme Actuary instead of the Claimant; When the Pension Manager indicated that Mr Winkler should be the Scheme Actuary, Mr Pearce had remonstrated explaining the merits of the Claimant but he was told that they wanted “someone with more clout” [17];

(h) Attempts were made by the Respondents to obtain new work for the Claimant with one potential client going into administration and another placing its work elsewhere while two existing pension schemes administered by the Claimant with funds amounting to £37 million were put out to tender in early 2009 but the Respondent was not successful in retaining them;

(i) In May 2009, it became clear to Mr Pearce that the diminution in the Claimant’s work meant that she did not have enough work to fill a full-time role.  In addition, in one of the Respondent’s other offices another actuary reporting to Mr Donaldson was also short of work.  In consequence Mr Donaldson and Mr Pearce discussed the possibility of redundancy including issues of what role should be put at risk of redundancy and how wide the pool of roles at risk, Mr Pearce had previous experience of redundancy exercise in 2007 in which all posts in a team not involving actuaries in which a team of four had been reduced to two.  He considered that the bulk of the work that had diminished was identifiable with the Claimant and not to any other Scheme Actuary;

(j) Mr Pearce decided to seek advice from the Respondent’s Human Resources team and he was advised that “in the circumstances a pool of one was feasible and responsible.  It was therefore considered that one appropriate approach would be for the Respondent to explain to the individual concerned what the situation was and suggest to them that if that individual wanted to avoid a redundancy situation (which might involve that person’s role being placed in a pool of one) the company would consider entering into a compromise agreement giving an additional month’s salary on top of any notice period despite what we believed and still believe was a reasonable approach for the business to take in the circumstances” [26];

(k) On 26 August 2009, Mr Pearce accompanied by Ms Budd from Human Resources met the Claimant but there was a dispute as to what was said with no contemporaneous notes.  While the Claimant asserts that she was told that she was at risk of redundancy and that she would be in a pool of one, Mr Pearce contends that he told the Claimant that she was likely to be at risk of redundancy and in those circumstances, she would be in a pool of one.  At the meeting, the Claimant made two suggestions of alternative work and one was to work within the Respondent’s technical department in which the Respondent did not have an actuarial resource.  Mr Pearce rejected this situation on the grounds that the salary commanded by the Claimant as an Actuary made her too expensive for such a role.  The second suggestion was that the Claimant might be seconded to the Pensions Regulator who would then meet the Claimant’s salary costs and Mr Pearce agreed to look at this possibility but later it was discovered that the Pension Regulator did not wish to pursue this;

(l) On 31 August 2009, the Claimant e-mailed Mr Pearce asking why she was in a pool of one and Mr Pearce indicated on 1 September 2009 as they were due to have a meeting that afternoon, he hoped to be able to explain the situation then.  Indeed at that meeting, Mr Pearce and Ms Budd attempted to explain to the Claimant that as at 1 September 2009, she was not then at risk of redundancy but that should she become at risk of redundancy, she would be in a pool of one was because the Scheme Actuary appointments were personal because the Pensions Act 1995 required pension funds to appoint a named Scheme Actuary, and that in the case of the Claimant, her schemes had either been wound up or the clients lost.  The Claimant explained that other Actuaries had previously taken over as Scheme Actuaries from other internal Actuaries but Mr Pearce explained that other Scheme Actuaries were not over burdened with appointments.  There was also discussion about the compromises open to the Claimant;

(m) At a further meeting on 9 October 2009 between the Claimant and Mr Pearce, she was offered two options of a redundancy or a compromise agreement and her answer to whether she should accept the compromise agreement was required by 16 October 2009; On 16 October 2009 the Claimant had a meeting with Mr Pearce and gave him two letters.  The first letter rejected the compromise proposal and asserted that any dismissal by reason of redundancy would be unfair as the Respondent was being unreasonable in putting her in a pool of one and the immediate rejection of her suggested proposed transfer to the technical department was inconsistent with a proper consultation process. She also asserted that the Respondents had steered work away from her over the years, denied her training opportunities and the decision to dismiss was a foregone conclusion.  The second letter invited the Respondents to make a fresh proposal;

(n) On 19 October 2009, a further meeting took place between the Claimant and Mr Pearce in which the Claimant asserted that she would like an amicable parting and she explained that she had no reason to leave the Respondent unless they made it worth her while. On 20 October 2009 there was a meeting between Mr Pearce, Ms Bud and the Claimant in which Mr Pearce told the Claimant that she was in a selection pool of one as appointments as a Scheme Actuary was made on a personal basis as well as on a company basis.  The Claimant said that she had rejected the compromise agreement to which Mr Pearce said they intended to carry out a consultation over a twenty day period.  Details of internal vacancies with the Respondent’s company and the wider Capita group and the Claimant was invited to send her CV which would be put on HR portal so that the Human Resources and other parts of the group would know that she was looking for alternative work;

(o) On 20 October 2009 there was a consultation meeting in which the Claimant was given a letter confirming that she was at risk of redundancy and details of the consultation process as well as a redeployment pack, an assessment of her redundancy payment.  Mr Pearce confirmed that she was in a pool of one with no one else being considered.  The Claimant’s evidence was that he considered her possible redundancy to be a foregone conclusion;

(p) On 26 October 2009 the Claimant sent to Mr Pearce an email confirming that she would be accompanied at the next meeting and that she did not consider it appropriate to discuss her letter of 16 October 2009 in which she had said from comments made in appraisal interviews and the general atmosphere and ethos, it seemed that Mr Pearce considered her profile did not fit and that this was a form of gender and race discrimination.  The Claimant indicated that this was a separate grievance;

(q) On 29 October 2009 the Claimant attended a second consultation meeting where she was accompanied by Mr Goundry who was another employee of the Respondent who had resigned.  At the meeting the parties reiterated their position with the Claimant disagreeing with the decision to put her in a pool of one and that she should have been in a pool of four.  Mr Pearce explained that there was not enough work to sustain four actuaries and that there was a risk of losing clients.  He said that if clients were transferred between actuaries there was a risk of losing clients if they were transferred between actuaries but the Claimant disagreed with this;

(r) On 9 November 2009 a third consultation meeting took place and the Claimant reported on progress she had made on chasing up alternative internal vacancies and Mr Pearce said that he had emailed Mr Donaldson at the other office to see if any suitable vacancies were there but he had been told that Mr Donaldson’s actuaries were under-employed. On 9 November the Claimant put forward five proposals by email to Mr Pearce which he rejected on 11 November 2009;

(s) On 12 November 2009 there was a further consultation meeting, which Mr Pearce confirmed would conclude the consultation period. Later on that day, he rejected one proposal that the Claimant had made in the course of consultation; and

(t) On 13 November 2009 a letter of dismissal was sent to the Claimant terminating her employment with effect from 11 December 2009 on grounds of redundancy. The Claimant appealed against the decision to dismiss her. Mr Turnbull heard her appeal at noon on 26 November 2009, and on 1 December 2009, she heard that her appeal had been rejected.

The approach of the Employment Tribunal

“..The determination of the question whether the dismissal is fair or unfair (having regard to the reason shown by the employer)—

(a) depends on whether in the circumstances (including the size and administrative resources of the employer’s undertaking) the employer acted reasonably or unreasonably in treating it as a sufficient reason for dismissing the employee, and

(b) shall be determined in accordance with equity and the substantial merits of the case.”

“There is no legal requirement that a pool should be limited to employees doing the same or similar work.  The question of how the pool should be defined is primarily a matter for the employer to determine.  It would be difficult for the employee to challenge it where the employer has genuinely applied his mind [to] the problem”.

“63. The majority of us find that the decision to limit the size of the pool to the Claimant when there were other Actuaries who could have been included in the pool was unfair.  It effectively was selecting the claimant to be dismissed on the reason that her client list had diminished for reasons that the respondents were careful not to associate with her performance”.

“succumbed to the temptation of presenting the alternative choice of a pool of more than one as entailing extra and unnecessary upheaval”[66].

“..an additional reason for regarding the pool of one as being unfair: it took a lot of the value away from the resultant consultation period activated by the Claimant being told that she was at risk of redundancy but in a pool of one.  With a larger pool, the claimant could make representations concerning the choice of the person to be made redundant: not so with a pool of one the decision as to the person to be made redundant was already implicit in the identity of the one individual in the pool” [68].

“69. In the circumstances of this case, all four members of the Holborn office were doing similar work.  All of them were Scheme Actuaries.  It is apparent that Mr Pearce with  responsibility for some 200 employees had an additional aspect of his job where there was scope, even where he to be excluded, for a selection to be made between three Scheme Actuaries who did not have the added element to the job that Mr Pearce had.”

The grounds of appeal

(a) It failed to follow the comments of Mummery J in Taymech (which was set out in paragraph 7 above) that “the question of how the pool should be defined is primary a matter for the employer to determine” and by holding instead that the principle in that case was less apposite when the number in the pool is the same as the number to be made redundant;

(b) It directed itself that where the number of candidates in the pool for redundancy is the same to be made redundant, or where there is a pool of one, that this deprives the Tribunal of assessing the reasonableness of that selection and is accordingly unfair;

(c) It failed to consider whether a hypothetical reasonable employer in the same circumstances as the Appellant could have concluded that there was a significant risk that if there was a pool consisting of three or four Actuaries based at Ludgate House that the Appellant would lose clients and instead substitute its judgement for that of the Appellant by finding that the risk was slight;

(d) It failed to direct itself as to whether a hypothetical reasonable employer in the same circumstance as the Appellant could have chosen to proceed by way of a pool of one and instead substituted its own view as to what would have constituted a fair pool for selection or that of the employer; and

(e) It made a decision which was perverse.

“it is not the function of the [Employment] Tribunal to decide whether they would have thought it fairer to act in some other way: the question is whether the dismissal lay within the range of conduct which a reasonable employer could have adopted”

“[9]...the courts were recognising that the reasonable response test was applicable to the selection of the pool from which the redundancies were to be drawn.”

“9. …I myself deprecate that attempts that are made in these industrial relations cases to spell out a point of law developed upon precedent to create rules that have to be applied by the … Tribunal in considering the straightforward question of fact which is provided for in [the predecessor of section 98(4) of the ERA] … That is the approach to the question that was required by the … Tribunal, and that is the approach the Tribunal adopted. As I say, the attempt to erect rules of law in cases of this kind is to be deprecated...”

“In these cases Parliament has expressly left the determination of all questions of fact to the [employment] tribunals themselves ….It is not right that points of fact should be dressed up as points of law so as to encourage appeals.  It is not right to go through the reasoning of these tribunals with a toothcomb to see if some error can be found here or there – to see if one can find some little cryptic sentence.”

“It would be a thousand pities if these reasons began to be subjected to a detailed analysis and appeals were to be brought upon any such analysis. This, to my mind, is to misuse the purpose for which reasons are given.”

“This is a case where the Tribunal concluded that the employers had not even applied their mind to the question of a pool consisting of people doing similar administrative jobs…The Tribunal was entitled to come to the conclusion that they did about the other work done by Mrs Ryan and that this is a case where the employers should have applied their minds to the creation of a pool for the purpose of deciding who to select for redundancy.  As they did not go through that process they have not made a fair selection for the purposes of section 57(3) and therefore the Tribunal were entitled to come to the conclusion that this was not a case of unfair selection for redundancy.”

“directing themselves that, where the number of candidates in the pool for redundancy is the same as the number to be made redundant or where there is a pool of one, that this deprives the Tribunal of assessing the reasonableness of that selection and is accordingly unfair”.

“An additional reason for regarding the pool of one as unfair; it took a lot of the value away from the resultant consultation period.” [68]

(a) Ground (a) as the Employment Tribunal did follow the comments of Mummery J for the reasons we have set out in paragraphs 26 to 34 above;

(b) Ground (b) as the Employment Tribunal did not approach the case in this way as explained in paragraphs 35 to 37 above but applied the correct tests;

(c) Ground (c) as the Employment Tribunal was entitled in the light of the applicable legal principles set out in paragraphs 26 and 27 above to conclude in the light of its statutory duty that the risk of the Respondent losing clients if the Scheme Actuary was changed was “slight” after having considered the evidence as we have explained in paragraph 11 above;

(d) Ground (d) as the Employment Tribunal was entitled to scrutinise the Respondent’s reasoning and to hold as it did in this case that it was flawed; and