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Employer Penalised for Failing to Follow ACAS Code in Sham Redundancy Dismissal

on Friday, 17 June 2022.

An employer should have applied the ACAS Code of Practice on Disciplinary and Grievance Procedures in a sham redundancy procedure. Having failed to do so, the employee's compensation was uplifted by 25%.

What is the ACAS Code?

The ACAS Code of Practice (ACAS Code) is a statutory code of practice. This means employers must have regard to the ACAS Code in disciplinary and grievance procedures. The ACAS Code expressly does not apply to redundancy dismissals or the non-renewal of fixed term contracts.

If an employer unreasonably fails to follow the ACAS Code, the Tribunal can increase compensation by up to 25% in the event of a successful claim. In addition, if an employee unreasonably fails to follow guidance contained in the ACAS Code, their compensation could be reduced by up to 25% in a successful claim.

What Were the Facts of This Case?

In the case of Rentplus UK Ltd v Coulson, Ms Coulson was employed in 2015 as Director of Partnerships. In 2017, a decision was taken to dismiss Ms Coulson, although she was unaware of this at the time. In 2018, Rentplus conducted a reorganisation, which was framed as a redundancy exercise even though the total number of posts was increasing. Ms Coulson brought a grievance on the basis her post was not genuinely redundant. Her grievance and grievance appeal were dismissed. Ms Coulson was given notice of the termination of her employment in August 2018. She brought claims for unfair dismissal and direct sex discrimination.

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The Redundancy Was a Sham

The Tribunal found the redundancy was sham. The real reason for Ms Coulson's dismissal was a desire to remove her from her role. 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%.

Rentplus appealed to the Employment Appeal Tribunal (EAT). Amongst its grounds of appeal it argued the ACAS Code could not apply where their reason for dismissal was redundancy.

The Appeal Was Dismissed  

The EAT upheld the Tribunal's decision and dismissed the appeal. Employers cannot sidestep the ACAS Code by disguising a misconduct or poor performance dismissal as a redundancy. The Tribunal had rejected redundancy as being the reason for Ms Coulson's dismissal. In addition, whilst the Tribunal had upheld the sex discrimination claim, that was not to say sex discrimination was the only reason for dismissal. On this basis the Tribunal was entitled to consider whether Rentplus had failed to follow the ACAS Code, and if so whether the failure was unreasonable.  Having found Ms Coulson's dismissal was predetermined and a sham, there had been a total failure to comply with the ACAS Code. That failure was unreasonable, so the Tribunal was entitled to uplift Ms Coulson's compensation.

What Can Employers Learn from This Decision?

This decision acts as a reminder that the ACAS Code can apply even in cases which appear at first glance not to related to a grievance or disciplinary matter. The Tribunal can look behind the employer's reason for dismissal in order to assess whether it is genuine. If it is not, a dismissal could be reclassified as one to which the ACAS Code applies.

For more information, please contact Charlotte Rose in our Employment Law team on 07741 311 065, or complete the form below.

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