Getting rid of senior staff has little to do with fairness. It has more to do with negotiating a suitable go-away package with the minimum of fuss. And with huge payoffs on the table, the law is rarely an issue. By Stephen Overell
The boardroom putsch is one of the classic manoeuvres of corporate life, practised, according to employment lawyers, on an almost daily basis by their clients. But it is also one of the few areas of their trade in which the law seems to be almost irrelevant. Whereas the law is of prime importance when carrying out a normal dismissal, when sacking a senior director, nine times out of 10, what is written in statute books is immaterial; it is what is written in contracts that is critical.
"There is an increasing tendency to dismiss directors unlawfully," says Daniel Barnett, an employment barrister at Gray's Inn Chambers. "They will be dismissed without notice for any reason without regard to whether it is fair or not and expected to mitigate their losses. It is cynical, but it has become standard advice."
While senior executives have the same employment rights as everybody else, with a maximum award of £51,700 potentially available for an unfair dismissal, this is only rarely at issue. Neither party wants to go to court or tribunal if they can avoid it; the risk of bad publicity and poor impact on future careers cuts two ways.
What is more important is what the contract says about notice periods. For almost all senior executives these are likely to be upwards of a year and could theoretically form the basis for a significant breach of contract claim.
Sue Nickson, head of employment at law firm Hammond Suddards Edge, says, "If there is not a situation of gross misconduct, and a company wants someone to leave quickly, the driver for the whole process is what the contract says about payments in lieu of notice."
And James Davies, partner in the employment department of law firm Lewis Silkin, says, "There is not really much law in the process. It all comes back to the terms of the contract. Usually, it is all done diplomatically and amicably and will normally result in a windfall for the individual. But if the terms of departure have not been properly tied down at the time of recruitment, it can