Guest Blog by Jacqueline Kendal, Head of Employment law and a barrister with Rosling King LLP
The last ten years have seen a significant increase in restructure and redundancy activity with many large conventional organisations and retailers facing stiff competition from online and e-commerce platforms.This has only been aggravated in recent times by uncertainty due to Brexit. Whilst redundancies may seem like an attractive and cost-effective solution for many companies needing to tighten their belts, it is no silver bullet for escaping the pitfalls of potential unfair dismissal cases as a result. The maxims should always be: proceed with caution.
Earlier this year, John Lewis announced that the annual bonus of the company would have to be reduced to its lowest level since 1954.The company revealed that their profits had dropped 77% due to redundancy and restructuring costs. This has been a common trend over the past year, with large retailers announcing steep job cuts owing to an extremely competitive environment thanks to the rise in online shopping. More recently, Ladbrokes announced that 5,000 of its staff would be undergoing a redundancy process and we are yet to see what impact a post-Brexit environment would have on the UK economy.
In the vast majority of restructure and redundancy cases,companies have incurred cost because of the restructure and redundancy process.This is due to the fact that restructures and redundancies are a very specific process which must be strictly followed. Increasingly however, due to so many companies undergoing restructures in recent years, companies are assuming that this is a process that can be undertaken internally without getting expert legal opinion involved. Whilst this may seem cost-effective at first, it is in reality a trap that can result in dramatic long-term costs for the organisation.
The redundancy process being pursued by Ladbrokes is of particular interest in this regard as the company has set up a very unorthodox selection criteria which all employees at risk of redundancy must undertake.
It is worth taking a closer look at what a proper redundancy process constitutes in order to understand why the approach chosen by Ladbrokes is potentially problematic. Once a company has established that there is a need to make redundancies and has settled on a group of potential candidates then a fair redundancy process involves genuine consultation with the employees who are at risk of redundancy. With a company such as Ladbrokes where there are more than 100 employees and union representation, the consultation should start on the selection criteria, but it must be done with care.
The selection criteria chosen by Ladbrokes however appears very surprising because it is reported that the scoring of the selection criteria breaks down as; an online test accounting for 40% of their score,face-to-face interviews which make up 20% of the score, past disciplinary record which will account for 10% of the score, and finally a test that involves persuading new customers to sign up which will constitute 30% of the overall score.
Indeed, on the surface it appears that 60% of the score criteria is more reminiscent of what an employer might use to determine who should be employed for a role in a formal recruitment process for a new role,similar to a competency-based assessment to determine suitability for a new job.
The fundamental issue is that the assessment criteria overlooks all the data that is available to the employer about how the employee performs in reality as an existing employee of their own organisation. This runs the risk of making the entire process unfair.
The selection criteria and its application need to be capable of being objectively justified; avoiding as far as possible subjective judgements. Ignoring or minimising the past performance of employees can lead to results which are both surprising and make the redundancy process unfair.
Due to the dramatic increase in restructure and redundancy processes over the last ten years, many employers are in danger of assuming that they do not need external legal advice to successfully bring about the changes that they need in their organisations. It is crucial for organisations to remember that restructures and redundancies remain only ‘potentially fair reasons’ for dismissal. There are many ways in which a business can still end up unfairly dismissing an employee through a restructure and redundancy process, resulting in spiralling costs and a potential domino effect among a large group employees who have been made redundant. Seeking objective legal advice from an external employment specialist is paramount and can prove to bevery cost-effective.