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Redundancy was unfair and discriminatory

Posted on 16th February 2009
Case law

This case provides a stark reminder why employers must follow objective, fair and reasonable redundancy procedures - otherwise the ability to successfully defend a claim for unfair dismissal or any type of discrimination claim may well be lost.

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Mr Chagger had been singled out and the selection criteria used were too subjective and unmeasurable

Abbey National plc v Chagger


In any discrimination case the burden of proof is initially on the employee. Once the employee can establish a prima facie case based on facts from which it may be presumed that there has been discrimination the burden shifts to the employer. The employee will win unless the employer can prove that its treatment of the employee was not for a discriminatory reason. This concept is termed as the "burden being reversed".

The burden of proof shifts only in cases where it is alleged that the respondent "has committed an act of discrimination on grounds of race or ethnic or national origins . . ." No mention is made of discrimination on grounds of colour or nationality. The EAT had to consider if the employee, Mr Chagger, could have the benefit of the shift even though he had only pleaded race discrimination on the grounds of colour.

Mr Chagger was Indian and worked for Abbey National as a trading risk controller. He was well paid earning around £100,000 per year. In 2006 he was dismissed for reason of redundancy. The pool of selection was his white female colleague and himself. Abbey National selected Mr Chagger based on nine criteria. Mr Chagger's score was the lowest between the two. Prior to being dismissed, Abbey National did not give Mr Chagger a step one letter as required under the statutory dismissal and disciplinary procedures. Consultation meetings were held with Mr Chagger. Prior to his dismissal Abbey awarded Mr Chagger a bonus which was 10% less than the previous year's. Mr Chagger raised two grievances based on what had happened and both were dismissed. He then commenced claims for unfair dismissal and race discrimination.

The employment tribunal awarded Mr Chagger over £2 million compensation for race discrimination based on estimated lost earnings for the rest of his career. The tribunal held that the dismissal was automatically unfair because Abbey National failed to follow the statutory procedures before dismissing. In any event, the tribunal said that the dismissal was unfair for substantive reasons because the whole exercise had been pre-determined. Mr Chagger had been singled out and the selection criteria used were too subjective and unmeasurable.

The dismissal was also tainted with race discrimination. The tribunal highlighted a range of evidence from which it drew the adverse inference of discrimination. For example, it relied on the circumstances of the unfair dismissal including the unfair redundancy process and that Mr Chagger had been singled out; the managers had not received any equal opportunities training; that Abbey National had failed to reply correctly to Mr Chagger's race discrimination questionnaire and it had failed to observe a number of key parts of the relevant Code of Practice. Thus the tribunal reversed the burden of proof. Abbey National was not able to satisfy the tribunal that it had a non-discriminatory reason justifying its treatment of Mr Chagger.

Abbey National appealed to the EAT against the findings of race discrimination because it argued that the tribunal had been wrong to shift the burden to them. Abbey National did not appeal against the finding that it had unfairly dismissed, but it argued that the employment tribunal's award was incorrectly calculated and should be reconsidered.

The EAT's decision

Fundamentally, having regard to how Mr Chagger pleaded his case and argued it at the tribunal, the EAT said it was obvious that it was not based just on the grounds of colour. It was based on race, colour and ethnic or national grounds. This alone justified the EAT dismissing the appeal. Having reviewed the relevant case law and the wording of the EU Directive, the EAT said it was inconceivable that the Race Equality Directive was not intended to apply to discrimination on grounds of colour, because in the real world all forms of race discrimination overlap. On this basis the appeal by Abbey National was dismissed.

In relation to the size of the compensation award, this issue was sent back ('remitted') to the employment tribunal to reconsider it, taking into account the possibility of Mr Chagger still being dismissed if the redundancy selection procedure had been conducted in a fair and non-discriminatory manner. In effect the tribunal will have to consider the merits of making a 'Polkey reduction' (meaning a reduction to reflect the fact that a dismissal would have been the outcome anyway if a fair procedure had been followed) as in an unfair dismissal claim. The EAT also said that the tribunal went too far in awarding lifetime loss of earnings. The tribunal will have to now consider the likelihood of Mr Chagger leaving Abbey National's employment in any event.

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