Does the ACAS Code apply to sham redundancy procedures?

July 22, 2022

The ACAS Code of Practice (the Code) is a statutory code of practice. The Code sets out the minimum steps that an employer should follow when handling a grievance or disciplinary matter for poor performance or misconduct. Failure to comply with the Code may result in compensatory awards being uplifted by as much as 25% by the employment tribunal.

The Code explicitly states that it does not apply to redundancy dismissals or the non-renewal of fixed term contracts.

In the recent case of Rentplus UK Ltd v Coulson [2022] EAT 81, the Employment Appeal Tribunal (EAT) considered whether an uplift in compensation had been properly applied, where the dismissal was supposedly due to redundancy.

Case facts

Ms Coulson was employed by Rentplus UK Ltd (Rentplus). A decision was taken in 2017 to dismiss Ms Coulson, although she was unaware of this at the time. Then in 2018, she was made redundant by Rentplus following a reorganisation, which was framed as a redundancy exercise even though the total number of posts was increasing. Prior to being dismissed Ms Coulson brought a grievance on the basis her post was not genuinely redundant. Her grievance and grievance appeal were not upheld by Rentplus. Ms Coulson was given notice of the termination of her employment in August 2018. She brought claims for unfair dismissal and direct sex discrimination in the Employment Tribunal (ET).

Employment Tribunal findings

The ET found the redundancy was sham. The real reason for Ms Coulson’s dismissal was a desire to remove her from her role, and that her role was not redundant. The decision to terminate her employment had been taken long before the so-called redundancy procedure started. The Tribunal also upheld the sex discrimination claim. It uplifted Ms Coulson’s compensation award by 25%.

Employment Appeal Tribunal ruling

Rentplus appealed to the Employment Appeal Tribunal (EAT) on the basis that the ET had failed to identify the relevant parts of the Code which had not been followed and that, in any event, no uplift should have been made where Rentplus’s reason for dismissal was redundancy and the ET had concluded there was sex discrimination.

The EAT upheld the ET’s decision and dismissed the appeal.

The EAT held that, in disciplinary situations, an employer cannot avoid complying with the Code by presenting their reasons as something other than a performance or misconduct issue, such as a redundancy. In addition, a finding of unlawful discrimination does not preclude the application of the Code. Issues with an employee’s conduct or capability, even if they are a result of discriminatory assumptions, will still be deemed a disciplinary situation to which the Code applies, and thus a fair capability or disciplinary procedure should have been followed.

What does this mean for employers?

The EAT decision is a reminder to employers that the Code can apply in instances that are not being addressed as disciplinaries or grievances. If an employer’s alternative reason for dismissal is not upheld and an ET finds the principal reason was really performance or misconduct, the Code may apply. Prudent employers should therefore bear the Code in mind when undertaking any dismissal process (or grievance process) to ascertain its applicability and to limit exposure to a finding by an ET that compensation be uplifted by up to 25%.

For further advice on the above, or any other employment matter please contact Faye Reynolds or Michael Brady.

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