Kvaerner Oil & Gas Ltd v Parker & Ors

Factual and Procedural Background

This is an appeal by Company A against the decision of an Employment Tribunal chaired by Judge Watt, sitting at The City on 25 February 2002, with extended reasons promulgated on 18 March 2002. The Tribunal's decision arose from complaints presented by four former employees of Company A, referred to as the Applicants, who claimed unfair dismissal due to redundancy. The Tribunal held in their favor. Company A appeals one aspect of the Tribunal’s reasoning related to the definition of the appropriate pool for redundancy selection under section 139 of the Employment Rights Act 1996. Company A does not challenge the overall finding of unfair dismissal but contests the Tribunal’s approach to defining the redundancy pool.

Company A is the corporate successor to several merged entities, inheriting employees under various contractual terms, including "P" agreement terms, "big E" terms, and "little e" terms. Following internal reorganisations, two separate business units were created within Company A, known as Unit 1 and Unit 2, both operating from the same site. Due to a decline in construction work, redundancies were made, including the Applicants, who were dismissed on grounds of redundancy in December 2000. The Applicants contended that the redundancy selection pool should have included both business units rather than being restricted to their own unit, alleging the employer adopted an artificially narrow pool to exclude higher-cost employees.

The Employment Tribunal found that the Applicants were unfairly dismissed, concluding that the employer's selection of the redundancy pool was unreasonable because it excluded employees from the other business unit despite the interchangeability of work. Company A appeals this conclusion, arguing that the Tribunal misapplied the legal test concerning the reasonableness of the employer’s chosen pool for redundancy selection.

Legal Issues Presented

1. Whether the Employment Tribunal misdirected itself in defining the appropriate pool for redundancy selection in a redundancy situation under section 139 of the Employment Rights Act 1996.
2. Whether the employer’s decision to limit the redundancy selection pool to one business unit was within the band of reasonable responses open to a reasonable employer.

Arguments of the Parties

Appellant's Arguments

• The employer had a long-standing practice of limiting redundancy pools to discrete business units, which was reasonable and accepted over many years.
• The Tribunal failed to apply the correct test of whether a reasonable employer could have limited the pool as Company A did.
• It was open to the employer to select a narrower pool, and the Tribunal improperly substituted its own view for that of the employer.
• Success on this point could affect the remedy hearing, though the overall finding of unfair dismissal was not challenged.

Appellees' Arguments

• The Applicants worked in the same location and performed similar, interchangeable maintenance work across both business units.
• The Tribunal’s finding that the work was interchangeable and that financial and management structures were not the primary determinant of pool reasonableness was correct.
• The employer failed to consult adequately on the redundancy pool selection, breaching minimum procedural fairness.
• The Tribunal’s conclusion that the employer’s choice of pool was outside the band of reasonable responses was supported by the evidence.

Table of Precedents Cited

Court's Reasoning and Analysis

The Court began by affirming the legal framework under section 98(4) of the Employment Rights Act 1996, which requires assessing whether the employer acted reasonably in treating redundancy as a sufficient reason for dismissal. The Court acknowledged that different reasonable responses may exist and that the Tribunal should not substitute its own view for the employer’s if the employer’s decision falls within the band of reasonable responses.

The Court closely examined the Tribunal’s reasoning, particularly paragraph 10 of the decision, which identified key factors: the formal separation of the two business units, the interchangeability of the maintenance work performed by employees across both units, and the Tribunal’s view that financial and management structures were not determinative in defining the redundancy pool.

The Court found that the Tribunal had properly considered the employer’s arguments and the relevant legal principles, and had not simply substituted its own view. Instead, the Tribunal concluded that the employer’s approach was unduly narrow and excluded employees who performed interchangeable work, thereby falling outside the range of reasonable responses.

The Court noted some brevity in the Tribunal’s reasoning but concluded that the Tribunal both asked the correct question and answered it appropriately. The employer’s appeal was therefore dismissed.

Holding and Implications

The appeal by Company A is DISMISSED.

The direct effect of this decision is that the Tribunal’s finding of unfair dismissal, based on the employer’s unreasonable choice of a redundancy selection pool, stands. No new precedent was established beyond affirming the application of the band of reasonable responses test in the context of redundancy pool selection. The decision reinforces that formal business unit distinctions are not necessarily determinative when work is interchangeable and that fairness requires consideration of the actual nature of the work performed.