Mitigating the risks of tribunal claims after redundancy

There may be less work around for most people but the phones have been red hot at Croner, a workplace consultancy, which reports that the number of employers requesting help from its tribunal representation service has doubled in the past year. Calls for support with redundancy have also risen – from 8% to a quarter of all enquiries – in the same period.

This trend is mirrored in the latest available figures from the Tribunal Service, which shows that the number of accepted claims rose over 40% to more than 189,000 in the year to March 2008.

While it stands to reason that an increase in redundancies will inevitably mean more potential conflict and upheaval in the workplace and provide a rich breeding ground for tribunal claims, Croner’s head of litigation, Richard Smith, says the problem has been compounded by the tight job market, which is also having an impact on the number of employees prepared to seek out compensation.

In the past if someone was made redundant or dismissed and was able to secure a new job on a similar salary they would more than likely just walk away. Now, however, with fewer job prospects they are looking to blame someone, says Smith, and make up for the shortfall in salary by taking legal action in the hope of winning a pay-out.

More bad news

But the bad news for employers doesn’t stop there. President of the Employment Tribunals, David Latham, says that with the chances of finding work diminished, tribunal panels are awarding higher levels of damages against employers. He said the fact that there are “fewer opportunities out there is likely to be taken into account” when it comes to compensatory awards.

It’s a trend Smith has also become aware of. He added: “Twelve months ago a 54 year-old van driver who was found to have been dismissed unfairly was awarded £3,000. That same case now would see a tribunal awarding closer to £20,000 as it recognises his loss is likely to be sustained due to lack of employment opportunities. The costs in discrimination cases are much higher.”

All these factors add up to a climate where HR professionals and other managers are under pressure to ensure they don’t make any errors in redundancy or dismissal processes, as this may leave their employer vulnerable to tribunal cases where the costs of awards are rising.

However, Smith warns that many HR professionals – especially those younger in age or working in smaller companies- may not have the right skill sets to deal with large-scale redundancies. He says people joining the HR profession in the past decade or so are likely to have spent most of their careers so far dealing with the positive aspects of employment, such as rewards and benefits, talent management and training.

But just what are the skills required by HR professionals having to deal with lay-offs and dismissals and what are the pitfalls they should be aware of?

Selection process

As far as Richard Martin, a partner at law firm Speechly Bircham, is concerned the main sticking point for employers is the way they go about selecting the employees to be made redundant.

He says tribunal panels will want to be satisfied that any selection has been carried out as objectively as possible. Have people in other parts of the business, who may have interchangeable skills, been included in the pool? Has the selection process been transparent and has there been consultation with unions or employees?

Martin suggests employers striving for objectivity can create a matrix scoring system in these instances, which lists certain skills and criteria as well as areas such as absence rates, giving each a weighting. He also advises that the matrix itself may have to be tweaked according to feedback from unions and employee representatives.

An area where, according to Smith, some employers leave themselves vulnerable to unfair dismissal claims is when they include employees who are poor performers with other candidates chosen for redundancy.

This is because with poor performance issues employers have an obligation to give the employee the chance and resources to improve. Typically, this will involve a series of meetings, and perhaps warnings, aimed at agreeing a programme of development as well as making training and coaching opportunities available.

“Firing a poor performer can often take between six and nine months, so redundancies are often seen as quick way of getting rid of someone,” says Smith. “But this apparent saving of time can turn into a compensation cost.”

Fair process

Martin says HR is often caught between the “business and the law” when it comes to redundancy. Management may want the headcount reduced within a specific timeframe but HR may realise it will take longer to go through a thorough and fair redundancy process.

Inexperienced HR practitioners may give in to this pressure but HR should try to resist it and “get the whole business behind the process,” he advised.

Having the confidence to make creative suggestions to business leaders about potential ways around a redundancy situation is something inexperienced HR professionals may lack, says Martin Brewer, a partner at law firm Mills Reeve.

“A chief executive may say he wants to lose 10% of the workforce but what he’s really saying is he wants costs taken out of the business,” he said. “HR should be coming back with solutions that can avoid the need for job losses, such as voluntary 4-day weeks, sabbaticals and job-shares as alternative options.”

Brewer also refutes the idea that the best way to minimise tribunal claims is to ruthlessly follow the letter of the law without concern for the individuals involved.

“One of the main reasons employees bring claims is because they don’t feel they’ve been treated in an honest and fair manner. If employers are seen to have carried out the redundancies in an open way and offered support such as outplacement services and financial advice, staff are far less likely to feel aggrieved,” he says.

A short guide to negotiation skills

Successful negotiators do most of their work before they get to the meeting table, so before a meeting:

It is good practice to negotiate with a union official or other employee representative, regardless of the number of employees an employer plans to lay-off – be it 20 or more, where there is a legal obligation to consult, or just one or two.
It is important to think through all the areas that will be covered; this will include setting your goals, considering what the other party wants and finding areas where there could be the potential for compromise.
It is vital to negotiate with your own management team to get an understanding of what they want and how far they are prepared to do a deal.

Influencing skills are important; employers should be creating a “context” to the negotiations before any formal meeting, through a mixture of corporate releases and informal discussions, so that union representatives are aware of the business drivers and the important ‘lines in the sand’.

During a meeting, negotiating such delicate matters as redundancies can be an intimidating prospect for an inexperienced HR person about to face union reps who may be better supported and more used to such scenarios.

“I sometimes see a rookie HR person getting terribly anxious and then having rings run round them,” said Smith.

“If they don’t know the full extent of the law and then they end up dealing with an in-house employee rep who also doesn’t know the law things can get even more complicated.”

So, make sure you know the employment law in this area, is his first piece of advice.

Once negotiations have begun it is important to look confident at the table and lay out your case carefully and persuasively, as well as to listen thoroughly to the other party.

“You have to keep asking yourself: ‘Are we progressing?’ Negotiating is a process of give and take and it may be important for the other side to feel as if they have gained something from the discussions. You have to play the game a bit,” says.

Richard Smith at Croner

Legal Q&A: Redundancy matrix