Lomond Motors Ltd v Clark EATS/0019/09

unfair dismissal | redundancy | pool of selection

The Employment Appeal Tribunal (EAT) has held that an employer's choice of who to include in a redundancy selection pool was within the range of reasonable responses because it was based on genuine, sound business reasons. Employers should be afforded a good deal of flexibility in the determination of the pool of selection for redundancy.

Mr Clark began working at Lomond Motors Ltd, a car dealership, in November 2000. It had sites in Glasgow and Ayr. Mr Clark's contract of employment stated that his place of work was Glasgow "or such other address as the Company may establish premises at". The employer acquired two further sites in Edinburgh and Stirling to be run by a subsidiary company, Lomond Motors (East) Ltd. Mr Clark agreed to go and work at the Stirling branch as a branch accountant, although his employment did not transfer to the subsidiary company. Ms Callaghan was branch manager for both the Glasgow and Ayr branches (although she did not have enough experience to run the Stirling location), while Mr Gallagher was responsible for the Edinburgh site.

By the end of 2007, cost cutting became necessary and Mr Eunson, the group financial controller, decided that one branch accountant should be in charge of both the Edinburgh and Stirling premises. Following consultation and an unsuccessful appeal, Mr Clark was made redundant. The pool of selection contained Mr Clark and Mr Gallagher (the two accountants who were responsible for only one branch), but not Ms Callaghan (who was in charge of two). There was nothing to choose between Mr Clark and Mr Gallagher on the initial criteria (experience, skills, qualifications and attitude). The employer moved on to other criteria: attendance, disciplinary record and length of service. As their attendance and disciplinary records were both impeccable, Mr Clark was chosen for redundancy as Mr Gallagher had longer service.

An employment tribunal found that the dismissal had been unfair. It said that the employer had not acted within the range of reasonable responses in restricting the selection pool to the two accountants working in the subsidiary company. The employer had not taken into account that Mr Clark was not an employee of Lomond Motors (East) Ltd; had not been based in Stirling for very long; and all three accountants performed the same, or very similar, tasks.

The EAT overturned the employment tribunal decision. The tribunal's decision on the interchangeable nature of the jobs was undermined by the fact that it had overlooked that Ms Callaghan did not have enough experience to run the Stirling location. In addition, Mr Clark had worked in Stirling for well over a year and could not have been said to have been there for a short time. The tribunal had also overlooked the following factors that brought the employer's decision to restrict the redundancy pool to the two accountants at the subsidiary company within the range of reasonable responses:

  • Although Lomond Motors Ltd and Lomond Motors (East) Ltd are two separate companies, the latter is a wholly owned subsidiary of the former and the redundancy plan involved a holistic approach to the business after an examination of all aspects of both companies, including the financial reporting structure.
  • The work that Mr Clark had been doing since moving to Stirling was entirely for the benefit of Lomond Motors (East) Ltd. Whatever the formalities of his contractual arrangements, his services were for it.
  • The Lomond Motors (East) Ltd sites formed a separate work centre from the Glasgow and Ayr branches. This was not a case of the west of Scotland and east of Scotland sites functioning as a single entity for branch accountancy purposes.
  • The running of the Glasgow and Ayr sites by Ms Callaghan as one operation for accountancy purposes was working well.
  • It was recognised that it would be beneficial for Stirling and Edinburgh to be run as a single operation for accountancy purposes.
  • It was Lomond Motors (East) Ltd that was over-provided for in terms of branch accountants, not Lomond Motors Ltd.
  • The group financial controller, having carried out his assessment and full examination of all aspects of the business, considered it appropriate to restrict the redundancy pool to the two accountants who were in fact doing work for Lomond Motors (East) Ltd. It was never suggested that his motives in determining the pool were anything other than genuine.

Case transcript of Lomond Motors Ltd v Clark (Microsoft Word format, 86K) (on the EAT website)

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