Summary and implications
This briefing looks at a few simple steps that employers can take to reduce the risk of employment tribunal claims and increase the chance of successfully defending them. Taking those steps should allow you to:
- run your business more efficiently and let managers focus on more productive issues;
- deal with difficult employee situations in a manner that should prevent you from darkening the tribunal’s door, or let you leave the tribunal with your head held high;
- avoid the frustration and adverse publicity of public criticism in an employment tribunal for failure to follow due process; and
- avoid having to pay out a large sum to settle a procedurally unfair dismissal claim where an ex-employee was a poor performer, guilty of misconduct or whose role was genuinely redundant.
The main points (see below for the detail) to watch out for are as follows:
- Follow proper process: Dismissal for a fair reason, including in a valid redundancy, can be made unfair if due process is not followed. Getting the content of meetings and timescales right pays dividends.
- Take notes and keep them: If despite best efforts you find yourself in tribunal, contemporaneous meeting notes will make you more believable than recollections that are written down afterwards. Once a dispute is imminent, you also have a duty to preserve these notes and an adverse inference may be drawn (i.e. the tribunal may be less inclined to believe you) if notes are deleted or missing.
- Take care with “without prejudice” conversations: Compromise agreements can be a useful tool for finding a mutually convenient and tidy exit for both employer and employee, but they can also be risky for an employer if they are proposed too soon, or when there is no appetite from the employee for one, potentially giving an employee grounds for a constructive dismissal claim. The Government’s proposal to introduce “pre-termination negotiations” may cut this risk in future.
- Plan ahead: It’s true – if you act in haste, you often repent at leisure!
The performance management process – act early and allow time to improve
Many employers, when facing a performance management situation, find themselves in a trap: they have allowed an underperforming employee considerable leeway, but have failed to address performance and have now reached the “make it or break it” point. Managers are frustrated when they find they cannot move quickly to dismiss, but then act quickly anyway and find that they have acted unfairly, when a few additional steps earlier on would have made matters much easier to deal with.
Top tips for fair performance management:
- Raise issues early
Tell a poor performing employee of the problem at, or as close as you can to the time the problem arises. Do not wait for appraisal time, because the problem is then devalued as “old news”. Instead, give the employee a specific set of goals to work towards to improve. If you suspect formal disciplinary action will become necessary, hold a meeting and set out targets and a timeframe for their achievement and then regularly review those targets.
- Keep a record of targets for improvement
Even before you begin a formal process, keep a record of the employee’s set targets and the timeframe for the expected improvement; monitor if they are being met (or not) and keep a dialogue with the employee. Then, if it becomes necessary to treat poor performance as a disciplinary issue, make notes of any meetings and further targets set.
- Allow time for improvement
For a performance management dismissal to be fair, you must have given the employee adequate time to improve. Typically, the whole process will take between three and six months and you will be expected to hold two or three review meetings with the employee, to assess performance against targets.
The redundancy process – inform, consult, consider and confirm
The process to be followed in a redundancy situation depends on the number of employees being made redundant.
In this briefing, we focus on small-scale redundancies only, i.e. where fewer than 20 employees at one establishment are potentially being made redundant. The process where 20 or more employees are being made redundant at one establishment (collective redundancies) is subject to a much more complicated statutory information and consultation process, which requires separate consideration.
It is still easy to trip up, even where only a few (or only one) role(s) is (or are) to be made redundant. Often, employers want to move quickly and with a minimum of disturbance to employees. These are commendable aims! But they can make a dismissal unfair where they are pursued at the expense of following a proper process.
Top tips for fair small-scale consultation:
a) Prepare and inform
Establish how many redundancies are being proposed (assume there are fewer than 20). Consider the appropriate pool of employees if selection will be necessary. Establish a proposed set of objective selection criteria if selection will be necessary. Put together a list of alternative existing vacancies if you are part of a group. Meet with all the employees (in a group) who might be made redundant. Explain the reasons for the potential redundancies, how many jobs are at risk, how people have been provisionally selected and what alternatives to redundancy are being explored. Ask for volunteers (if appropriate) and take a note of what was said.
b) Consult employees early
Hold individual meetings with affected employees once proposals have a clear shape but are not yet finalised. This is the stage at which employees are able to make meaningful contributions regarding the selection process, their own provisional selection and alternatives to redundancy.
c) Factor in adequate time between meetings
You may be keen to move through the redundancy process at pace – to permit speedy resolution. However, an employment tribunal will criticise any undue haste that undermines the meaningfulness of the consultation. This is particularly true if you do not allocate time to receive and consider employees’ suggestions or if employees did not have sufficient time to find a companion for an individual meeting.
d) Take time to reflect
Once you have made the initial announcement that redundancies are proposed, allow (ideally) at least a week to pass to receive employees’ feedback and consider it before starting individual consultation meetings. If you then decide that redundancies are nonetheless needed, that individual redundancies are still appropriate, that you have allocated employees into the appropriate pools and that you have provided them with an opportunity to comment on your proposed selection criteria (and considered their comments), you can confirm the redundancy selection.
e) Aim for objective scoring of employees
In assessing whether a redundancy dismissal was fair, an employment tribunal will consider the objectivity of both the selection criteria used and the scoring process.
For this reason, you should choose criteria which can be defined with precision and applied in an independent way. Examples include skills/qualifications, disciplinary record, attendance record (taking care not to discriminate because of disability or maternity/parental leave absence) and work performance-based criteria. Do not score anyone by reference to any protected characteristic under the Equality Act 2010.
When you rely on selection criteria that involve a subjective judgement, typically performance criteria, it is sensible that you allocate two managers (or a manager and an HR professional) to carry out the scoring process. This should ensure greater consistency and reduce the risk of any apparent or actual unfairness.
Remember that you may reveal an employee’s scoring to the particular individual, but that (generally speaking) you ought not to reveal the scoring of colleagues.
f) Remember the duty to offer suitable alternative employment
Once you have selected employees for redundancy, you are under an ongoing legal duty to make a reasonable search for alternative employment. This duty continues throughout the employee’s notice period. It is not enough simply to provide an employee with a vacancy list, although this is a useful starting point. Actively consider whether there are roles suited to an employee’s skills and experience and suggest them to the employee. Be wary of assuming that an employee will not be interested in a more junior role than the one s/he currently performs. But remember that this obligation applies to vacancies; you don’t have to create new jobs.
The value of the written word: take contemporaneous notes and keep them!
It is important to remember in all dismissal situations, whether redundancy, conduct or performance-related, that contemporaneous notes will be important evidence in defending any subsequent claims. Given the time that can lapse before an employee’s claim is heard by a tribunal, they are also often invaluable in prompting witnesses’ memories of events! Notes need not be verbatim, but should capture the main points discussed and raised, and it is a good idea to ask an employee to sign a copy in order to show they are an accurate reflection of the meeting. Remember to date your notes!
Once it becomes apparent that a claim by an employee is likely or pending, you have a positive duty to ensure all relevant documentation is preserved. For example, you may have to suspend automatic deletion of emails from employee accounts. If you fail to do so, an employment tribunal may be inclined to draw an adverse inference against you.
Protected conversations – the Government’s proposal
One of the Government’s recent raft of employment law reform proposals was the introduction of protected conversations. These have since been whittled down to become “pre-termination negotiations” and, if introduced, would make settlement discussions inadmissible in unfair dismissal claims, even in the absence of an existing dispute at the time of the conversation. This would mitigate the risk of gifting an employee a constructive dismissal claim if you raise the issue of settlement with them. However, at the moment this proposal only applies to unfair dismissal claims, which carries the risk that an employee bringing a claim will seek to include a discrimination claim in order to bring such discussions into evidence.
Take care with “without prejudice” conversations
There is no escaping the fact that compliance with due process can be time consuming and costly. This is often why employers try to cut short the process and offer employees a compromise agreement early on.
Compromise agreements can be a useful tool in expediting a mutually agreeable exit. But they should be approached with caution. Strictly speaking, if no dispute has arisen between the employer and employee, any offer of a settlement in return for the employee’s exit will not be subject to “without prejudice” protection (and so the content of those discussions may be admissible in evidence).
Take care to gauge the employee’s appetite for a settlement before starting any “without prejudice” conversations. At the beginning of a “without prejudice” conversation, ask if the employee is happy to speak on that basis. It is sensible to put in place the framework of an open dismissal process, before raising the possibility of a compromise.
This can increase the pressure on the employee to consider an offer. It also reflects your commitment to follow a fair process if need be. On the flip side, if done incautiously, attempting to open a “without prejudice” conversation could amount to grounds for a constructive dismissal claim.