Recession the essential guide: downsizing, restructuring

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Recession the essential guide downsizing,
restructuring employment law

• Neil Maclean
• Partner and Head of Employment Unit
• 19th March 2009

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Facing up to recession

• Credit control, debt management, and managing
  cash flow
• Business development, marketing and PR on a low
  budget
• But it still isnt enough.
• Downsize, restructure and employment law.

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Alternatives to redundancy

• Recruitment freeze and reduction of workforce by
  natural wastage
• Removal of temporary or contract staff
• Overtime ban
• Redeployment/retraining
• Lay off
• Short-time working
• Sabbaticals
• Pay freeze/cut
• Cancellation of bonuses/withdrawal of benefits
• Flexible Working
• Early retirement/voluntary redundancy

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What is redundancy ?

• Termination is due to redundancy if
• The employer has ceased or intends to cease to
  carry on business for the purposes for which the
  employee is employed either generally or at the
  employees workplace (Business disappearing)
• or
• The requirements of the business for employees to
  do work of a particular kind have ceased or
  diminished (or are expected to do so), either
  generally or at the employees workplace (Jobs
  disappearing).

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Collective redundancies

• Where employer is proposing to dismiss as
  redundant
• 20 or more in 90 day period at same establishment
  (minimum of 30 days)
• 100 or more in 90 day period at same
  establishment (minimum of 90 days)
• Must provide statutory information consult with
  employee representatives about
• Avoiding the dismissals (including reasons for
  the redundancies)
• Reducing the number of dismissals
• Mitigating the impact of dismissal
• Must notify DBERR
• Failure to inform consult
• Protective awards of up to 90 days pay per
  affected employee
• Unfair dismissal clams

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Is it fair ?

• Redundancy is one of the potentially fair reasons
  for dismissal.
• Employer must show that redundancy situation
  exists and that the dismissal of the employee is
  wholly or mainly attributable to that state of
  economic affairs.
• To be actually fair, the dismissal by reason of
  redundancy must be reasonable in all the
  circumstances of the case having regard to the
  size and administrative resources of the employer
  and the equity and substantial merits of the
  case.
• The employer must have complied with the
  Statutory Dismissal Procedure.

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Was it a redundancy dismissal?

• Generally, employment tribunals will not second
  guess employers business decisions for making
  the redundancies. But they will look carefully
  at the genuineness of a redundancy programme
  involving just one person (or a small number of
  people) where the individual is claiming that
  there is an ulterior motive for dismissing him.
• If not within statutory definition, then not a
  redundancy dismissal.

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Was dismissal reasonable in all the circumstances
of the case?

• Fair Redundancy Selection
• Fair Procedure

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Fair redundancy selection

• Fairly free hand in choosing selection criteria
  provided the redundancy pool is fair and the
  selection criteria are
• Reasonably objective
• Not in breach of an agreed procedure
• Fairly applied
• Common criteria include one, or a combination of
  any, of the following
• Skill and experience for the remaining jobs
• Key skills
• Performance records
• Length of absence/absenteeism
• Disciplinary Record
• LIFO ???

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Pool for selection

• Adherence to agreed procedure or established
  custom practice would be starting point but can
  depart if employer can justify doing so for good
  operational reasons.
• Choice of pool should be reasonable having regard
  to all the circumstances.
• Tribunal will not second guess employers choice
  of pool, unless it produces inherently unfair
  results or it looks arbitrary.

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Application of criteria

• Apply the criteria fairly
• Check accuracy of factual details
• If absence is a factor, weigh reasons for absence
• Avoid discrimination in choice or application of
  selection criteria
• Watch for automatically unfair criteria
• E.g Union membership pregnancy or maternity,
  assertion of statutory rights, certain health
  safety matters, previous grievance, part-timers.

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Fair redundancy procedure

• To provide as much advance warning of the
  impending redundancy as is reasonably practicable
  in the circumstances
• To consult with the affected employees
• To look for and, if applicable, offer any
  suitable available vacancies to the otherwise
  redundant employees
• NB special protection for employees on maternity
  leave

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The Statutory Dismissal Procedure

• Until 6th April 2009 an employer must
• Write to the employee to invite him to a meeting
  and advising him that the employer is
  contemplating his dismissal for redundancy.
• Hold the meeting to discuss the proposed
  redundancy, at which the employee is given the
  opportunity to explain why he should not be
  dismissed.
• Following the meeting advise employee of outcome
  of meeting and of the right to appeal.
• If employee appeals, hold an appeal meeting and
  advise him of final outcome after the appeal
  meeting.
• Failure to take any one of these steps renders
  the dismissal unfair.

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Costs of redundancy

• Notice
• Statutory Redundancy Payments
• Contractual or enhanced redundancy payments
• Enhanced pension benefits/early retirement
• Risk of unfair dismissal claim
• Risk of discriminatory dismissal claim
• Management time
• Morale, productivity, wasted recruitment and
  training costs.
• Emotional impact
• Message to market ?

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One step ahead ?

• No substitute for good management
• Need a good flow of information
• Pro-active management of resources (including
  staff) to seek to avoid need for redundancies
• Serious consideration to alternatives to
  redundancy
• Engage with your staff share information, share
  the problem, share the pain, share the solution ?

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Contacts

• Edinburgh Office
• 1 Rutland Court
• Edinburgh
• EH3 8EY
• T 0131 270 7700
• F 0131 270 7788
• DX ED3
• Edinburgh
• www.andersonstrathern.co.uk

Glasgow Office 4 Blythswood Square Glasgow G2
4BG T 0141 242 6060 F 0141 221 4733 DX
GW157 Glasgow