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Employment Law SeminarAction. \ Reaction.
October 2012
Case study 1
Burness
Edinburgh \ Glasgow
Action
Options
Outsourcing
Redundancy
Alternatives to Redundancy
Performance Management
Burness
Edinburgh \ Glasgow
Outsourcing
• Cost of services• Management time• Specification of
services• Negotiation of
contract• Practicalities of
transfer• Employee issues
Aims
20% Cost Savings
Minimise TimeImprove
Performance
Standards
Burness
Edinburgh \ Glasgow
Outsourcing
“Straight” TUPE
• Identify services to transfer• Identify new Provider and
obtain information on “measures”
• Identify employees “assigned” to entity
• Identify employee representatives and commence information (and consulting) process
• Provide employee liability information 14 days before transfer
• All employees transfer with terms, continuity, liabilities
• Joint and several liability for any failure to inform (and consult)
• No liability for events prior to transfer unless transferee objects to transfer
“Fair” TUPE
• Identify services to transfer• Identify new Provider and
obtain information on “measures”
• Identify employees “assigned” to entity
• Identify employee representatives and commence information (and consulting) process
• Provide employee liability information 14 days before transfer
• Employees on list transfer with terms, continuity, liabilities and liable for additional employees transferring
• Joint and several liability for any failure to inform (and consult)
• Liable for events prior to transfer/provider liable for events after transfer
“Hard” TUPE
• Identify services to transfer
• Identify new Provider• Identify employees to
transfer (“Lemon drop?”)• Employees transfer with
terms/continuity/liabilities• Obligation on Provider to
dismiss staff• No liability for any costs
associated with employees
Burness
Edinburgh \ Glasgow
Outsourcing
Minimise Time
Incorrect identification of transferring staff
Failure to I&C with correct staff
Missing “employee liability”
information
Warranty/Indemnity from Provider
Minimise Time
Failure to inform (and consult)
Financial penalty (up to 13 weeks
salary)
“Brief” I&C process
Indemnity from Provider
Improve Performance
Standards
Dismissal “automatically”
unfair
Liability with Provider but risk of “two party” claims
Increase in contract price
Provider indemnity
Compromise Agreement
New location – redundancy?
RISKAIM SOLUTIONIMPACT
NB REMEMBER SECOND GENERATION TUPE
Burness
Edinburgh \ Glasgow
Redundancy
•The business disappears
Complete Closure
•The workplace disappears
Closure of place of business
•The job disappears
Diminished need for employees
•The job disappears there
Diminished need for employees at
particular location
Section 139, Employment Rights Act 1996
Burness
Edinburgh \ Glasgow
Redundancy
Identifying redundancy
situation
Redundancy or re-organisation or
both?
When is the duty to consult
engaged?
Proposal to dismiss by reason of redundancy
Contemplating the need for
redundancies
Collective consultation
Counting the numbers of proposed
redundancies
Separate ‘establishments’
Volunteers & Suitable
Alternatives
Burness
Edinburgh \ Glasgow
Redundancy
Support to look for alternative employment
Redundancy packages
Suitable alternative employment
Provisional selection
Selection criteria
Pools for selection
Volunteers
The business case*
Anatomy of the consultation process
*Remember your “three P’s”: “provisional, possible and potential”
Burness
Edinburgh \ Glasgow
Redundancy
How long for consultation?
20 or more = 30 days
100 or more = 90 days
How do you calculate numbers?
‘establishments’
Volunteers
Suitable alternative
Who are the appropriate representatives?
Recognised trade union
Employee reps
When can you serve notice of termination?
The Junk case
How is a protective award calculated?
13 weeks salary
Change in approach
Can we stagger the process?
The Tribunal’s approach
Should we use Compromise Agreements?
Still beware protective award claims
Generating Options
Burness
Edinburgh \ Glasgow
Alternatives to Redundancy
• Are difficult decisions more achievable in difficult times…?
• Is redundancy really the only viable option? What are the alternatives?
Change Management
Burness
Edinburgh \ Glasgow
Alternatives to Redundancy
Pay• Pay freeze• Deferred pay• Pay cut• Reduce bonus• Unpaid work
Hours• Short-time (no work, no
change in pay, but staff ‘owe’ un-worked hours in upturn)
• Sabbaticals (paid and unpaid)
• Reduced working week• Part-time contract• Cut overtime• Re-structure shift working • Unpaid holiday leave
Jobs• Recruitment freeze• Stop agency
workers/temps• Redeploy staff• Job-sharing • Demotion• Secondments to other
companies• Early retirement• Voluntary redundancies• Compulsory redundancies
Benefits• Cut pension contributions• Reduce spend on
insurance plans• Remove benefits in kind
Burness
Edinburgh \ Glasgow
Alternatives to Redundancy
Implement
Consideration and decisions
Consultation process
Consultation is King – inform/explain
Avoiding/minimising redundancies
Business case for change
The Process of Change
Burness
Edinburgh \ Glasgow
Alternatives to Redundancy
SOSR
Termination and
re-engagement
Dealing with refusal to agree to variation
Implementation of change – preferably with employee agreement
Reasonable notice of proposed change
Consultation
Some Other Substantial Reason
Burness
Edinburgh \ Glasgow
Alternatives to Redundancy
Sabbaticals
• Retain talent• Continuous
employment?• Paid/ unpaid/
partially paid?
Secondments
• Internally/ externally
• Retain talent• Good client
relations• Transferring the
cost• Delaying the
inevitable?
Short time working/ lay-off
• Statutory concept
• Need the contractual right
• Guarantee payments
• Four weeks or more
Reduced working week
• Retain talent• Voluntary
agreement• Creative
solutions
Redeployment
• Flexibility & mobility
• Moving talent to more occupied areas of the business
• Re-training• Interplay with
redundancy entitlements
• Suitable alternative employment
• Trial periods• Temporary or
permanent?
Reduced pay or benefits
• Working harder for less money
• Agreement – unlawful deduction from wages
• Long-term sustainability & employee engagement
Burness
Edinburgh \ Glasgow
Alternatives to Redundancy
Risks & Remedies
Constructive dismissal
Breach of contract
Unfair dismissal (SOSR)
DiscriminationUlterior motives
Working under protest
Stand and sue
Burness
Edinburgh \ Glasgow
Q A
Case Study 2: Social Media
Jennifer Skeoch
Burness
Edinburgh \ Glasgow
Case Study 2
• Your business (Sales Solutions) has decided it will have to make redundancies due to the economic downturn
• You are extremely keen to keep the process confidential to manage very real commercial risks associated with the decision being widely known before you speak to certain clients
• You meet with all 300 affected employees to announce the proposed changes and stress to them the need for confidentiality
Burness
Edinburgh \ Glasgow
After the meeting, the following tweets are brought to your attention…
@SalesSolutionsPaul• “Just been told 300 of us are for the chop – total
joke #worstemployerever”• “Couldn’t care less to be honest – I hate my a**hole
manager anyway #goingdownthetube”• The employee who owns the account has 1500
followers, many of them clients• Later in the day, the employee deletes the tweets• What can you do?
Burness
Edinburgh \ Glasgow
Social Media – The Positives
• Presenting a positive image of the company• An efficient way of sharing information,
knowledge and best practice• Business development and new business
instructions• Gathering information about candidates for
recruitment• Increasing the company’s profile and reputation
Burness
Edinburgh \ Glasgow
Key Pitfalls for Employers
• Loss of productivity• Excessive use of social media can detract from day-to-day duties
• Misconduct• Behaviour at work and outside of work• Privacy considerations
• Posting of inappropriate statements• Derogatory comments about employer or clients• Disparaging comments about colleagues – “cyber bullying”• Disclosure of confidential information• Breach of copyright
Burness
Edinburgh \ Glasgow
What you want to avoid...
Burness
Edinburgh \ Glasgow
•
Burness
Edinburgh \ Glasgow
Inappropriate Comments – What Can Be Done?
• Platform for venting frustrations• Workplace gossip/letting off steam• Inexcusable and/or offensive remarks
• What kind of action can be taken?• Misconduct leading to disciplinary action• Defamation actions
• Policy and Procedure• Do you have a social media policy in place?• Have employees been trained on its terms?
Burness
Edinburgh \ Glasgow
Dismissal – What tests will be applied?
• What was the reason for dismissal?• Breach of procedure• Derogatory and disparaging comments about employer• Reputational risks• Bullying/harassment of other employees• Disclosure of confidential information• Loss of trust and confidence
• Was the dismissal fair?• Did the employer act reasonably in treating the reason given as sufficient?• Was the decision within the range of reasonable responses?• Reasonable and common-sense approach endorsed
Burness
Edinburgh \ Glasgow
Key Considerations
• Nature/seniority of employee’s role
• Seriousness of alleged misconduct
• Nature of organisation
• Terms of Social Media Policy
Burness
Edinburgh \ Glasgow
Key Considerations
• Disclosure of Confidential Information• What damage was caused?• How many people saw the statement?
• Reputational Damage • Could the employer be identified?• Did anyone complain?
• Mitigating Factors• Deletion of comment?• Apology?
Burness
Edinburgh \ Glasgow
Case Study Analysis
• What are the issues?• Seriousness of comments• Reputational risks• Confidential information• Commercial impact
• Collateral damage• Who saw the comments?• Real or perceived risks?• Can the damage be quantified?
Burness
Edinburgh \ Glasgow
Case Study Analysis
• What action would you take?
• Would dismissal be fair?
• How could you minimise the risks of a successful claim being brought?
Burness
Edinburgh \ Glasgow
Q A
Case Study 3: Senior exits, protecting your business and restrictive covenants
Morag Hutchison
Burness
Edinburgh \ Glasgow
What are we going to cover?
• What are restrictive covenants?• Why impose restrictions?• Types of restrictive covenants• Enforcement
Burness
Edinburgh \ Glasgow
What are restrictive covenants?
• Restrictive covenants are restrictions on an employee’s activities that continue even after the employment relationship has ended
• Restrictive covenants are usually contained in employees’ contracts
• More appropriate for and more common in the contracts of senior staff
Burness
Edinburgh \ Glasgow
Why do you need restrictive covenants?
• An ex-employee has very limited obligations to their former employer
• Employees may have knowledge of technology, strategic information about the employer's business or customer contacts that they may try to use for the benefit of their new employer or business
• Restrictive covenants can be particularly important during economic uncertainty to protect businesses
Burness
Edinburgh \ Glasgow
Types of Restrictive Covenants
• Non-competition covenants• Non-solicitation covenants• Non-dealing covenants• Confidentiality
Burness
Edinburgh \ Glasgow
Scenario A - Sarah
• Your company provides ATMs to banks and supermarkets in central Scotland
• Sarah was one of five Senior Sales Managers. Unfortunately, she was one of the three Senior Sales Managers who were made redundant during the recent restructure
Burness
Edinburgh \ Glasgow
Scenario A - Sarah
• Two weeks after she leaves, you see her in a nearby restaurant having lunch with one of your most important customers, a large supermarket chain. A week after that the same client customer calls you to say they have decided to cancel their contract with you and move to one of your competitors.
• You subsequently discover from another couple of your customers that they have also been approached by Sarah in her new role as Head of Sales at one of your competitors.
Burness
Edinburgh \ Glasgow
Scenario A - Sarah
• The next day Simon, one of your best Sales Managers, tells you that he has been approached by Sarah who has offered him a position with her at her new company
• You are very concerned about the continuing impact Sarah is having on your business. What can you do?
Burness
Edinburgh \ Glasgow
Scenario B - Denis
• You run a private dental surgery in central Edinburgh. Following a restructure, one of your dentists, Denis, is made redundant.
• Two months later while you are out to pick up some lunch you notice that a new private dental surgery has opened two streets away. You meet one of your former clients walking out of the new surgery who is happy to tell you that he was contacted by Denis who offered him dental care cheaper than your surgery.
Burness
Edinburgh \ Glasgow
Scenario B - Denis
• You had noticed some clients had stopped coming to your surgeries
• What can you do to protect your business?
Burness
Edinburgh \ Glasgow
Clause 1.1 Non-compete restriction
• In order to protect the legitimate business interests of the Company, the Employee undertakes to and agrees with the Company that, whether on the Employee’s own account or as principal, agent, representative, partner, director, employee, joint venturer, consultant or otherwise, the Appointee will not during 24 months following the termination of their employment be engaged by any business which is or (intends to be) in competition with the Company anywhere in the [UK].
Burness
Edinburgh \ Glasgow
Non-Competition Covenants
• Employees restricted as a matter of general law from disclosing confidential information
• The treatment that non-competition clauses have received by court has changed in recent years
• Name competitors or define the business• Limit the geographical area• Appropriate to seniority/salary?
Burness
Edinburgh \ Glasgow
Clause 1.2 Non-Solicitation Covenant
• The Employee will not during the period of six months following termination of their employment, in any capacity whatsoever, solicit or endeavour to entice away from the Company any business, orders or custom for any products or services from any customer.
Burness
Edinburgh \ Glasgow
Non-Solicitation Covenants
• No implied restriction on soliciting a former employer’s customers
• Dealing with an employee’s personal influence over an employer’s
• Covenant should be restricted to customers with whom the employee had contact during a specified period before termination
Burness
Edinburgh \ Glasgow
Non-Solicitation Covenants
• Need not always be limited to customers with whom had direct contact, could include those whom employee was aware of if the intention is to protect either the general customer base or general goodwill of business
• Clause which attempts to extend the restriction to potential customers will be harder to enforce
Burness
Edinburgh \ Glasgow
Clause 1.3 No solicitation of employees covenant
• The Employee will not during the period of 12 months following termination of their employment, solicit or entice, or endeavour to solicit or entice, away any employee of the Company
Burness
Edinburgh \ Glasgow
Non-solicitation of employees
• Reasonably well accepted that preventing a former employee from soliciting other employees may protect the employer’s legitimate interest in the stability of its workforce
• More likely to be enforceable if the covenant is restricted to more senior or key employees
• Unlikely to be enforceable if it could apply to hundreds or thousands of more junior employees
Burness
Edinburgh \ Glasgow
Clause 1.4 Non-dealing covenant
• The Employee will not during the period of three months following the termination of their employment have business dealings with or accept in any capacity whatsoever business, orders or custom from any customers for any products or services
Burness
Edinburgh \ Glasgow
Non-Dealing Covenants
• A restriction on solicitation of customers can also be extended to cover the provision of services (i.e.. no active steps need to be taken by the employee, the customer may approach them)
• This broadens the prohibition significantly and so a court may be more cautious about upholding it
• Enforceability of the covenant will depend on the interest being protected
Burness
Edinburgh \ Glasgow
Non-Dealing Covenants
• Enforcement may be more likely where the employer can establish a substantial personal connection between the employee and the relevant customers
• A non-dealing covenant will not be enforceable if it prevents any contact with the relevant business contacts
• The restriction must be focused on contact that would affect the employer’s business
Burness
Edinburgh \ Glasgow
Confidentiality
• Employees are subject to a general duty of fidelity and confidentiality
• Post-termination, it would seem that this duty only applies to information that is strictly confidential and is in the nature of a trade secret
• Duty of confidentiality is found in common law so does not require an express restraint to be enforced
Burness
Edinburgh \ Glasgow
Enforcing a restrictive covenant
• Has the employee breached the covenant?• Is that covenant reasonable?• Has that breach caused loss?• How should that loss be assessed?• Has the employee signed the contract?
Burness
Edinburgh \ Glasgow
How do you enforce a restrictive covenant
• Court of Session or Sherriff Court?• Interim interdict• Damages for the breach• Interim interdicts can be very expensive• Granting of an undertaking• Deterrent value
Burness
Edinburgh \ Glasgow
Q A
Case Study 4: The Disengaged Employee
David Stirrat
Burness
Edinburgh \ Glasgow
Case Study – the Disengaged Employee
Simon is the company’s IT Director. His role was at risk of redundancy as part of a company restructure occurring eight months previously. However, in the end, the IT Director’s role was not one of those selected to be made redundant. Several of Simon’s team were made redundant at that time. Simon earns £120,000 pa.
Following the restructure, the demands on the IT department have become severe. A lack of responsiveness from the IT team is becoming a drain on the business. Simon appears disinterested. When asked about the performance of the team, he blames the present situation on the restructure which he did not support. In the last six months Simon has been absent on seven occasions, for one day only. He has reported these absences as resulting from severe stress and anxiety.
The CEO has lost patience with Simon. She has informed the HR Director that it is in the interests of all concerned that Simon leaves the business. The CEO has also held informal discussions with Judith, the IT team manager, with a view to offering Simon’s role to Judith. Judith is highly respected within the business and the CEO believes that, with Simon out of the picture, Judith will turn the IT team around.
Burness
Edinburgh \ Glasgow
Options
We will consider the merits of three options to exit Simon from thebusiness: 1. Commence the company’s performance management procedure;
2. Dismiss Simon immediately without any procedure;
3. Hold a without prejudice meeting and offer Simon a compromise agreement package worth £36,000 plus his notice in lieu
Which option would you go for in the circumstances?
Which option do you think would cost the least?
Roughly how much do you think it would cost?
Burness
Edinburgh \ Glasgow
Option 1 - Performance Management Procedure
Fast forward 18 months…
Simon was dismissed four weeks ago following a 17 month procedure. The procedure was elongated as Simon had a series of sickness absences and he appealed at every stage of the procedure. The stress of the process aggravated his condition and the process stalled completely for a period of three months whilst Simon received in-patient treatment.
Simon, and some members of his team, are upset and angry with the company's handling of his case. Despite a number of adjustments being put in place to try to accommodate Simon's condition, they feel more could have been done.
You have just received notice of the following claims made by Simon against the company in the ET and civil court for:• unfair dismissal • disability Discrimination• psychiatric injury
Burness
Edinburgh \ Glasgow
Option 1 – Performance Management Procedure
Benefits
• No breach of the company's procedures
• Simon is dismissed fairly on the grounds of incapability and the company has reasonable prospects of defending the unfair dismissal and disability discrimination claims brought
• Internal PR: Consistent policy of dealing with employees in accordance with internal procedures, and values of the company are maintained
Burness
Edinburgh \ Glasgow
Option 1 - Performance Management Procedure
Negatives
• Time taken to resolve has cost money including pay and benefits throughout, medical expert fees, legal spend, and temp support
• Management time lost that could have been spent driving the department forward
• Internal PR: the CEO and other senior staff expected a robust and swift resolution
• External PR: Sector press and local media have picked up on the Disability Discrimination allegations
• No certainty with regard to ET claims from Simon. Company will have to invest in the defence of the ET claims, not a recoverable cost
• Events have given rise to the PI claim. Could be an expensive additional claim to fight. Even if insured: Impact on future premiums?
Burness
Edinburgh \ Glasgow
Option 2 – Dismiss without procedure
Fast forward 18 months...
Simon was dismissed 18 months ago causing some internal unrest. He appealed but was not re-instated.
He raised an unfair dismissal claim and a disability discrimination claim. The company tried to settle early, but Simon was determined to 'have his day in court'. The company have already paid £35,000 in legal fees preparing for the case. The case was listed for six days and has been adjourned twice due to illness.
You have just received notice of the re-listed hearing: it will be heard 18 December 2012 to 7 January 2013, with a break of 13 days over the Christmas period.
Witnesses are unsettled. The company is considering an increased offer of £120,000 to draw a line under the affair and save further legal fees and the possibility of a substantial award.
Burness
Edinburgh \ Glasgow
Option 2 – Dismiss without procedure
Benefits:
• Internal PR: Swift and decisive action went down well in some quarters
• Judith has been an excellent replacement for Simon and has been in post over 12 months
• The cost of Simon's pay and benefits were saved from the earliest opportunity and have been 'banked' to cover future settlement or legal fees
Burness
Edinburgh \ Glasgow
Option 2 – Dismiss without procedure
Negatives:
• The risk that Simon was re-instated on appeal. This would have led to the worst case scenario - Simon still being employed (possibly with ET claims running anyway)
• ET claims from Simon. Cost of compensation or settlement and legal fees
• External PR: Sector press and local media have picked up on the disability discrimination allegations
• Internal PR: Internal unrest immediately after the dismissal caused issues that took up management time
• Management time and emotional drain on those involved
Burness
Edinburgh \ Glasgow
Option 3 – Compromise agreement
Fast forward 18 months...
Simon was dismissed 17 months ago. He didn't accept the first offer of £36,000 but he signed the compromise agreement in return for an increased offer of £48,000
Judith has been in post over 12 months. She is now a valued member of the team.
Simon took the opportunity to take some time away from work. He is now working successfully in a part-time role. He finds this less demanding position is more conducive to the management of his condition.
Burness
Edinburgh \ Glasgow
Option 3 – Compromise agreement
Benefits:
• Internal PR: Swift and decisive action perceived as effective
• The IT Department benefitted by early recruitment of Judith
• The cost of Simon's pay and benefits were saved from the earliest opportunity and set off against the cost of the settlement monies paid to him
• Confidentiality clauses in the compromise agreement ensured that external PR wasn't a problem
• No future risk due to the compromise agreement
• Positive outcome for Simon, regarding his health and personal cost
Burness
Edinburgh \ Glasgow
Option 3 – Compromise agreement
Negatives:
• Cost: Upfront payment of £48,000 plus notice in lieu to Simon
• Create expectation/culture of reward for underperformance?
What might have happened?
• Risk of 'being held to ransom' by Simon if he had not accepted the offer. He could have held out for more or refused to go. (Mitigated to an extent with a clear strategy to revert to the performance management procedure if this had happened – put company in a reasonable negotiating position).
• Risk of resigning and claiming constructive unfair dismissal
Burness
Edinburgh \ Glasgow
Option 1 - Performance management procedure
Cost of £77,000
Pay and benefits year 1 30,000
Pay and benefits year 2 15,000
Occupational health input 1,500
Legal fees:
(Legal input on performance management process) 2,500
(Successful defence after six day hearing) 28,000
Total cost: 77,000
Burness
Edinburgh \ Glasgow
Option 2 - Dismiss without procedure
Cost of £112,000
Settlement sum 120,000
Legal fees:
Prep for hearing 35,000
Settlement 2,000
Saving re pay and benefit
Year 1 (30,000)
Year 2 (15,000)
Total cost: 112,000
Burness
Edinburgh \ Glasgow
Option 3 - Compromise agreement
Cost of £46,000
Compensation sum 48,000
4 months notice in lieu 40,000
Legal fees:
Negotiation and CA 2,000
Contribution 1,000
Saving re pay and benefit
Year 1 (30,000)
Year 2 (15,000)
Total 46,000
Burness
Edinburgh \ Glasgow
Q A
