For many businesses, 2008 was the toughest year in living memory, and the outlook for 2009 is gloomy.
We are already seeing clients seeking advice on employment issues surrounding pre-pack administrations and phoenixes. In the former, struggling companies are bought before they go into administration while, in the latter, the assets of one limited company are moved to another legal entity, usually a new limited company.
Understandably, this is a complex area, particularly in relation to the impact of staff transfers under TUPE and the related need to change employment contracts and make redundancies.
There is no doubt that businesses will need to take early and firm views on redundancies. However, some will survive by thinking laterally and implementing innovative ways of working. After all, if you fail to retain core skills, you will face an uphill struggle when the recession is over.
Innovate to survive
Innovative organisations will think cleverly about ways of avoiding or minimising redundancies and, in consultation with employees, will consider changing terms and conditions and alternative ways of working. And employees will need to be more accepting of these alternatives.
We have already experienced cases in which the redundancy consultation process has been initiated, but in which job cuts have been avoided – for instance, by reducing hours or salary reductions (from directors to shop-floor workers). Deferring or reducing salaries with the promise of a bonus in more favourable trading conditions, and offering shares in the business have already been considered by many businesses.
With so many redundancies expected in the coming year, there is widespread concern that litigation will skyrocket. However, this is by no means a foregone conclusion. But people may become more litigious because they have nothing to lose, and we may see more cases go to final hearing as employers become less inclined to settle at a price the claimant is happy with.
However, it is equally possible that staff will realise that these are difficult times for everyone. With the national focus on redundancy, many will recognise there are a great number of others in the same situation and that their employer has had little choice – provided, of course, that the business has communicated effectively with them.
Firm resolve
The abolition of the formulaic statutory disputes procedure may also reduce the number of cases going to tribunal. And this process will come into effect in April as a result of the Gibbons Review, which aimed to resolve matters between employers and employees without recourse to legal proceedings.
Yet while the aim behind the procedures was in itself commendable, it led to an overemphasis on process, which has in turn led more people to bring – and win – claims based on the failure to follow procedures to the letter, rather than on the merits of the dismissal itself.
No nightmare
The next year is going to be difficult – there is no denying that. However, 2009 need not be the employment law nightmare that many expect. It will take innovation, flexibility and better communication than ever, but companies that handle the inevitable employment issues well will differentiate themselves from their competitors, and emerge with a loyal and strong workforce that will ensure their long-term success once we come out the other side.
Key points
- More redundancies before the end of 2009
- Employment issues likely to arise from pre-pack administrations and phoenix companies
- Innovative alternatives to redundancy needed
- Fewer or more realistic settlements in employment claims may lead to more cases reaching final hearing
- However, abolition of statutory disputes procedure and a feeling of ‘everyone’s in the same boat’ may actually reduce litigation.
Kathy Halliday, employment partner, Cobbetts
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