Lessons to be learnt from mass redundancies
Nicola Powell, January 18, 2013
Financial giant UBS last year cut thousands of jobs from its global workforce. It has drawn headlines for the way it locked employees out of their workplaces, putting these individuals on “special leave”, even before the redundancy process had properly begun.
Cuts on this scale present both operational and legal challenges to a business and must be carefully navigated.
Redundancy is a potentially fair reason for dismissing an employee. The law accepts that that business needs can change, resulting in a diminished need for certain employees. However legislation imposes certain processes and procedures to ensure the redundancy process is fair.
Before making redundancies, any employer should ideally consider the alternatives - would it be possible to achieve the same aims by a hiring freeze, reducing overtime, or using fewer outside contractors? These alternatives may be less disruptive to employee morale while achieving the same cost cutting levels.
The employer is under an obligation to inform and consult with affected employees. It must provide adequate information including the reasons for the dismissals, the numbers of proposed redundancies, details of the redundancy selection process and consultation process and of the compensation payments to be made.
The purpose of providing this information is to allow employees to engage in proper and meaningful consultation. The employer has a duty to enter into a consultation with an open mind, and be prepared to consider any workable and appropriate alternatives to redundancy suggested during the consultation process.
Selection for redundancy should be based upon fair, objective, and measurable criteria. This is an area where employers can inadvertently engage discriminatory behaviour if the criteria it uses for selecting employees for redundancy negatively affects certain employees for reasons related to a 'protected characteristic' (e.g. sex, race, disability).
An employer should consider whether there is any alternative employment within the organisation, and, if an offer is made the employee is entitled to a trial period in any new position.
There are circumstances, and the UBS case illustrates this well, when there may be genuine business reasons why an employer feels it must depart from the usual process. For example, a company may take the decision that the redundancies will be so disruptive to the moral and loyalty of the workforce that there is a genuine danger of significant employee sabotage.
Alternatively, a company could be worried that disgruntled employees may try to poach contacts or take proprietary information if they are allowed on the premises. In such circumstances, it may be justified to keep the employees locked out of their workplace, as long as the company continues to pay their salary and makes clear that they have not pre-determined the redundancy process. The onus will be on the employer to show why its process was fair and the tribunals will look at the circumstances to determine the fairness rather than just taking the employers word for it.
Some employers take the approach of offering enhanced redundancy packages (over and above their strict legal obligations) in an effort to entice redundant employees to sign compromise agreements. These can be advantageous to both parties; the company will not face the uncertainty of possible future employment tribunal claims, and employees may walk away with a better compensation package (particularly if the redundancy appears inevitable in any event).
With thousands of redundancies planned, a company like UBS will be hoping to carry out the redundancy process as smoothly, and as cost effectively, as possible. However, with so many jobs on the line, it is unlikely that everyone affected will be happy with the outcome.
Nicola Powell (pictured), solicitor at IBB solicitors