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Volume X, Number 331

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People at the Centre: Hard Decisions in Hard Times but Some Thoughts and Reassurance for HR (UK)

A recent Acas survey has reported that over a third of employers (37%) are likely to make staff redundancies in the next 3 months (see here). That is a statistic which can be a surprise to no one, except possibly that it is not higher.

Often in redundancy situations, the majority of the “sympathy” quite rightly lies with the impacted employees. There is no doubt that losing one’s job and the consequences arising from that can be pretty grim. That said, our experience from working with our clients is that it is very rare for those having to make those difficult decisions to relish doing so. Far from it. Acas guidance from a number of years ago made it clear that it was not just OK but actively healthy for the manager carrying out the redundancies (excruciatingly dubbed the “downsizing envoy”) to become distressed, anxious and drained by the whole business.

As such, we have no doubt that businesses faced with cutting jobs or closing operations as a result of the pandemic are agonising over those decisions – not helped by the fact that companies are increasingly being scrutinised on decisions taken and the impact of them, particularly in relation to their people (see our previous blog here). This is particularly pertinent for those companies seeking investment, as any such actions are likely to play into their ESG ratings. However, even beyond this, the way in which businesses have treated their staff during this time may be remembered for years to come and regurgitated by the press on the occasion of each new story about them.

In the face of serious financial pressures and numerous competing agendas (including in particular the prospect of an appearance before the often misinformed and always unforgiving Court of Public Opinion), what should the HR priorities be?

Below are some thoughts which we hope will help and reassure decision-makers in this area. Please note that although these suggestions are in one sense nothing more than what responsible management should be doing anyway, they do sometimes go beyond an employer’s pure legal obligations. However, we appreciate that in these very difficult times, some businesses have suffered terribly. For those businesses, the focus may therefore quite rightly be on doing whatever is necessary for survival in the short term and there will simply not be the same scope for taking these factors into account. For any in that position, these thoughts are not intended to make the hard decisions harder –  to the extent that these any of them are more than your company can manage at the moment, we suggest that you file them away for a time in the future when times may be easier.

The pandemic has not changed employment law

While the government has tinkered with some existing statutes e.g. the circumstances in which statutory sick pay might apply, by and large the law still remains the law. As such, you can be reassured that companies can still make redundancies and a redundancy which would have been fair before the pandemic is still fair now. Equally, a redundancy dismissal which would have been unfair pre-coronavirus probably still will  be – the pandemic grants employers very little ability to cut corners in that respect.

We won’t set out the law in detail here, but in short the company must ensure that it has a genuine redundancy situation and that it follows a fair process (including consulting and carrying out searches for suitable alternative employment or other options to avoid the termination). Where the threshold for collective consultation is met, the company must ensure that it complies with the additional statutory obligations.

Prospective investors, customers and staff won’t necessarily view redundancy processes as a “red flag”. However, what they will want to see is that decisions are being taken well, with a clear business rationale, but at the same time ensuring that employees are treated as fairly as the circumstances permit.

Where possible, hard people decisions should be made in accordance with any stated “purpose”

This is a practical point more than a legal one, but nonetheless important in terms of how the company’s decision will be viewed by employees, customers, suppliers and even investors. Where a company has a stated purpose or set of values, it should “test” any difficult decisions it is making against that purpose. If the decision proposed feels uncomfortable in light of that purpose, it is potentially not the right decision to be taking – notwithstanding that it may be legally completely sound.

For example, there have been some high profile “bad” press stories in relation to companies which have (entirely lawfully, it should be said) taken the benefit of the furlough scheme despite having the means not to need to do so, or which have laid off staff whilst also paying out bonuses to the Board. Conversely, step forward those “heroes” of the pandemic who have been seen to put the safety and retention of their staff above pure profit.

In one sense redundancies are unlikely ever to accord expressly with a company’s stated purpose. However, there may be situations where making redundancies is sadly but inescapably necessary to protect that part of the business which does have reasonable prospects of keeping going (to keep that bit of the body healthy which can be kept healthy). That is an aim which may well accord with a company’s purpose, though it is clearly more likely to come unstuck where the company is seen to be inflicting all of the pain of this difficult time on its employees, while protecting the Board (see below).

Consider whether senior management should share the pain

Again, this is a practical employee relations point more than a legal one – relevant particularly for those companies which are conscious of how their decisions may be viewed through an ESG lens or by the torches-and-pitchforks division of the Court of Public Opinion.

To be clear, this is not a legal obligation. However, if companies wish their employees to continue to be engaged, for public perception of the company to remain strong and so on, they should carefully consider whether any pay cuts or other pain, etc., ought to apply also to senior management rather than just more junior staff, or better still, to a greater extent or for a longer period.

Investors are likely to take a dim view of a Board which imposes a pay cut on employees or furloughs them without top-up, but leaves itself and other senior cohorts unscathed.

  1. Companies should be seen to explore alternatives before making redundancies

An employer is not obliged by law to be able to show that redundancy was the only option and the required result couldn’t have been achieved by e.g. reducing working hours, cutting overtime, retraining etc. Its only obligation is to act reasonably in using the redundancy situation as a reason for making the dismissals, a much lesser burden. That being said, Acas, CBI and the TUC have released a joint statement (see here) emphasising that “employers should exhaust all possible alternatives before making redundancies“. This is not law, but it does reflect the mood of the moment and in the current pandemic situation, there has been a slight swing in the pendulum in the usual balance between the “moral” and the “legal”.  Taking these steps, and being seen to do so, will hopefully help mitigate employees’ resentment towards any redundancy processes.

Companies should be looking out for the well-being of their employees

Again, this is not a new obligation. The Health and Safety at Work Act imposes an overall duty to ensure so far as reasonably practicable the health and safety of your employees.

It goes without saying that companies should comply with all of their usual obligations in addition to the latest government guidelines in terms of whether employees should work from home and ensuring that their premises are Covid-secure, etc. However, employees might also face additional challenges at this time, such as mental health issues due to continued remote working, or financial hardship if they are unable to work.

Employers may wish to consider any other practical steps they can take – including checking in regularly on employees (as opposed to only contacting them in relation to work matters), perhaps paying more than the statutory requirements for a period for those employees who are required to self-isolate and so on.

Try to run any redundancy processes with respect and dignity

It is entirely possible for a redundancy to be “fair” in the eyes of the law, and yet leave a very bad taste in the mouth. Although by definition, a redundancy is a dismissal for a business reason (contrast to a performance or conduct-related dismissal), unless the individual is in a unique role there will have been an element of selection. Unfortunately, it will therefore feel personal to the individual who is put at risk.

As such, our recommendation would be to try and provide individuals with as much information about the rationale for the redundancy and their selection as possible. Yes, it might be possible to run a more sparse process (and sometimes it is entirely necessary), but if it isn’t business-critical to do so, we suggest you take the time to explain things properly and don’t just do the bare minimum. Individuals are more likely to be angry when they do not understand why a decision has been taken or why they have been selected. They don’t have to agree with your thinking but even just seeing that there was some may help their reconciliation with their selection.

Likewise, redundancy processes can have a long-lasting impact on the morale and engagement of those left behind. Those remaining employees are more likely to keep working well for you if they have been kept informed of the process, understand the reasons and also feel as though their departing colleagues have been treated with dignity and not just as unnamed cannon-fodder. Say something nice about them, acknowledge their past service, express your regrets publically and the moral debt you owe them for what you have done is in some part repaid in both their eyes and those of the survivors. As the Acas, CBI and TUC statement says “Losing your job has a human as a well as a business cost. The way you let people go says a lot about your organisation’s values. Think about how you will handle the conversation – whether its face-to-face or remote. And remember, you may want to rehire the same person in the future.

© Copyright 2020 Squire Patton Boggs (US) LLPNational Law Review, Volume X, Number 295
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About this Author

Laura Nelson, attorney, Squire
Attorney

Laura Nelson’s practice focuses primarily on preparation for and attendance at Employment Tribunal Hearings, preparation of advice on all aspects of employment law, and drafting of contracts of employment, company handbooks and compromise agreements. Laura has also advised on a variety of football related employment issues, as well as more sports specific issues such as player transfers, third-party influence over clubs and the international transfer of minors.

+44 207 655 1082
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