395: Can a compensatory award be reduced to zero if redundancy is inevitable?

The recent case of Teixeira v Zaika Restaurant Ltd highlights the importance of applying objective selection criteria and giving proper warning and consultation in individual redundancies, even where there is a pool of one.

When deciding the amount of a compensatory award for unfair dismissal, an Employment Tribunal will consider what is just and equitable in all the circumstances, having regard to the employee’s financial loss. The Tribunal must then make a percentage deduction for the likelihood that the employee would have been dismissed in any event, even if a fair procedure had been followed (known as the ‘Polkey deduction’). Applying a Polkey deduction can be a difficult and speculative exercise and, in this recent case, the Employment Appeal Tribunal (EAT) held that an Employment Tribunal was wrong to apply a 100% Polkey deduction.

Mr Teixeira was employed in a team of ten chefs in a chain of three London restaurants. He was the least experienced and the only non-specialist chef. Due to a significant reduction in work caused by the COVID-19 pandemic, Mr Teixeira was dismissed due to redundancy. He was given no warning or consultation and was the only chef to be dismissed. Mr Teixeira brought a claim for unfair dismissal.

The restaurant chain admitted that Mr Teixeira’s dismissal was procedurally unfair since it had not operated any procedure at all. When assessing compensation, the Tribunal had to decide whether he would still have been dismissed if a fair procedure had been followed. Since Mr Teixeira was the only non-specialist chef, the Tribunal concluded that it was reasonable to have a redundancy pool of one. Even if Mr Teixeira had been pooled and scored on a redundancy matrix with all the other chefs, the Tribunal considered that he would have been the lowest scorer. Given the 100% likelihood that the outcome would still have been the same if a fair procedure had been followed, his compensatory award was reduced to zero.

On appeal, the EAT ruled that the Tribunal’s reasoning was flawed. The Tribunal had failed to consider the requirement for warning and consultation even where there is a selection pool of one. Even if dismissal was inevitable, it might have been delayed, and consultation might have resulted in different selection criteria or a larger pool. If a pool of one had been fairly chosen, dismissal would not necessarily have taken place when it did.

Mr Teixeira’s case was then sent back to the same Tribunal to reconsider what the outcome would have been if he had been consulted about the following:

• The pool and the selection criteria;
• the application of criteria;
• how long the consultation would have taken; and
• the chance that he would have been fairly dismissed.

Therefore, this case illustrates that Tribunals must ensure their reasoning is based on evidence of what the employer would have done if it had acted fairly and that the Tribunals will examine pools of one particularly closely due to the effective certainty of redundancy.

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