4. Burness
Edinburgh Glasgow
Outsourcing
• Cost of services
20% Cost
Savings • Management time
• Specification of
services
Aims • Negotiation of
Improve
contract
Performance Minimise
• Practicalities of
Time
Standards
transfer
• Employee issues
5. Burness
Edinburgh Glasgow
Outsourcing
• Identify services to transfer • Identify services to
• Identify services to transfer
• Identify new Provider and
“Hard” TUPE
“Fair” TUPE
transfer
“Straight” TUPE
• Identify new Provider and obtain information on
obtain information on • Identify new Provider
“measures” • Identify employees to
“measures”
• Identify employees transfer (“Lemon drop?”)
• Identify employees “assigned” to entity
“assigned” to entity • Employees transfer with
• Identify employee terms/continuity/liabilities
• Identify employee representatives and
representatives and • Obligation on Provider to
commence information dismiss staff
commence information (and consulting) process
(and consulting) process • No liability for any costs
• Provide employee liability
• Provide employee liability information 14 days before
associated with employees
information 14 days before transfer
transfer
• Employees on list transfer
• All employees transfer with with
terms, continuity, liabilities terms, continuity, liabilities
• Joint and several liability and liable for additional
for any failure to inform employees transferring
(and consult) • Joint and several liability
• No liability for events prior for any failure to inform
to transfer unless transferee (and consult)
objects to transfer • Liable for events prior to
transfer/provider liable for
events after transfer
6. Burness
Edinburgh Glasgow
Outsourcing
AIM RISK IMPACT SOLUTION
Failure to I&C with
Minimise Incorrect
identification of
correct staff
Missing “employee
Warranty/Indemnity
from Provider
Time transferring staff liability”
information
“Brief” I&C process
Minimise Failure to inform
Financial penalty
(up to 13 weeks Indemnity from
(and consult)
Time salary) Provider
Liability with Provider indemnity
Improve Dismissal Provider but risk of Compromise
“two party” claims
Performance “automatically”
unfair
Agreement
Increase in contract New location –
Standards price redundancy?
NB REMEMBER SECOND GENERATION TUPE
7. Burness
Edinburgh Glasgow
Redundancy
Complete Closure • The business disappears
Closure of place of
business • The workplace disappears
Diminished need
for employees • The job disappears
Diminished need
for employees at • The job disappears there
particular location
Section 139, Employment Rights Act 1996
8. Burness
Edinburgh Glasgow
Redundancy
Identifying When is the
Collective
redundancy duty to consult
consultation
situation engaged?
Counting the
numbers of
Proposal to dismiss proposed
by reason of redundancies
Redundancy or re- redundancy
organisation or Separate
both? Contemplating the „establishments‟
need for
redundancies Volunteers &
Suitable
Alternatives
9. Burness
Edinburgh Glasgow
Redundancy
Anatomy of the consultation process
The business case*
Volunteers
Pools for selection
Selection criteria
Provisional selection
Suitable alternative employment
Redundancy packages
Support to look for alternative employment
*Remember your “three P‟s”: “provisional, possible and potential”
10. Burness
Edinburgh Glasgow
Redundancy
Generating Options
How do you calculate
numbers? Who are the appropriate
How long for consultation?
representatives?
20 or more = 30 days „establishments‟
Recognised trade union
100 or more = 90 days Volunteers
Employee reps
Suitable alternative
How is a protective award
When can you serve notice calculated? Can we stagger the
of termination? process?
13 weeks salary
The Junk case The Tribunal‟s approach
Change in approach
Should we use
Compromise Agreements?
Still beware protective
award claims
11. Burness
Edinburgh Glasgow
Alternatives to Redundancy
Change Management
• Are difficult decisions more achievable in difficult
times…?
• Is redundancy really the only viable option? What
are the alternatives?
12. Burness
Edinburgh Glasgow
Alternatives to Redundancy
Pay Hours Jobs Benefits
• Pay freeze • Short-time (no work, no • Recruitment freeze • Cut pension contributions
• Deferred pay change in pay, but staff • Stop agency • Reduce spend on
• Pay cut „owe‟ un-worked hours in workers/temps insurance plans
upturn) • Redeploy staff • Remove benefits in kind
• Reduce bonus
• Sabbaticals (paid and • Job-sharing
• Unpaid work
unpaid)
• Demotion
• Reduced working week
• Secondments to other
• Part-time contract companies
• Cut overtime • Early retirement
• Re-structure shift working • Voluntary redundancies
• Unpaid holiday leave • Compulsory redundancies
13. Burness
Edinburgh Glasgow
Alternatives to Redundancy
The Process of Change
Implement
Consideration and
decisions
Consultation process
Consultation is King – inform/explain
Avoiding/minimising redundancies
Business case for change
14. Burness
Edinburgh Glasgow
Alternatives to Redundancy
Some Other Substantial Reason
SOSR
Termination and
re-engagement
Dealing with refusal to
agree to variation
Implementation of change –
preferably with employee agreement
Reasonable notice of proposed change
Consultation
15. Burness
Edinburgh Glasgow
Alternatives to Redundancy
Short time Reduced Reduced pay or
Sabbaticals Secondments Redeployment
working/ lay-off working week benefits
• Retain talent • Internally/ • Statutory • Retain talent • Flexibility & • Working harder
• Continuous externally concept • Voluntary mobility for less money
employment? • Retain talent • Need the agreement • Moving talent • Agreement –
• Paid/ unpaid/ • Good client contractual • Creative to more unlawful
partially paid? relations right solutions occupied areas deduction from
• Transferring the • Guarantee of the business wages
cost payments • Re-training • Long-term
• Delaying the • Four weeks or • Interplay with sustainability &
inevitable? more redundancy employee
entitlements engagement
• Suitable
alternative
employment
• Trial periods
• Temporary or
permanent?
16. Burness
Edinburgh Glasgow
Alternatives to Redundancy
Constructive
dismissal
Breach of
Stand and sue
contract
Risks &
Remedies
Unfair
Working under
dismissal
protest
(SOSR)
Ulterior
Discrimination
motives
19. Burness
Edinburgh Glasgow
Case Study 2
• Your business (Sales Solutions) has decided it will
have to make redundancies due to the economic
downturn
• You are extremely keen to keep the process
confidential to manage very real commercial risks
associated with the decision being widely known
before you speak to certain clients
• You meet with all 300 affected employees to
announce the proposed changes and stress to them the
need for confidentiality
20. Burness
Edinburgh Glasgow
After the meeting, the following tweets are brought to your
attention…
@SalesSolutionsPaul
• “Just been told 300 of us are for the chop – total joke
#worstemployerever”
• “Couldn’t care less to be honest – I hate my a**hole
manager anyway #goingdownthetube”
• The employee who owns the account has 1500
followers, many of them clients
• Later in the day, the employee deletes the tweets
• What can you do?
21. Burness
Edinburgh Glasgow
Social Media – The Positives
• Presenting a positive image of the company
• An efficient way of sharing information,
knowledge and best practice
• Business development and new business
instructions
• Gathering information about candidates for
recruitment
• Increasing the company‟s profile and reputation
22. Burness
Edinburgh Glasgow
Key Pitfalls for Employers
• Loss of productivity
• Excessive use of social media can detract from day-to-day duties
• Misconduct
• Behaviour at work and outside of work
• Privacy considerations
• Posting of inappropriate statements
• Derogatory comments about employer or clients
• Disparaging comments about colleagues – “cyber bullying”
• Disclosure of confidential information
• Breach of copyright
25. Burness
Edinburgh Glasgow
Inappropriate Comments – What Can Be
Done?
• Platform for venting frustrations
• Workplace gossip/letting off steam
• Inexcusable and/or offensive remarks
• What kind of action can be taken?
• Misconduct leading to disciplinary action
• Defamation actions
• Policy and Procedure
• Do you have a social media policy in place?
• Have employees been trained on its terms?
26. Burness
Edinburgh Glasgow
Dismissal – What tests will be applied?
• What was the reason for dismissal?
• Breach of procedure
• Derogatory and disparaging comments about employer
• Reputational risks
• Bullying/harassment of other employees
• Disclosure of confidential information
• Loss of trust and confidence
• Was the dismissal fair?
• Did the employer act reasonably in treating the reason given as sufficient?
• Was the decision within the range of reasonable responses?
• Reasonable and common-sense approach endorsed
27. Burness
Edinburgh Glasgow
Key Considerations
• Nature/seniority of employee‟s role
• Seriousness of alleged misconduct
• Nature of organisation
• Terms of Social Media Policy
28. Burness
Edinburgh Glasgow
Key Considerations
• Disclosure of Confidential Information
• What damage was caused?
• How many people saw the statement?
• Reputational Damage
• Could the employer be identified?
• Did anyone complain?
• Mitigating Factors
• Deletion of comment?
• Apology?
29. Burness
Edinburgh Glasgow
Case Study Analysis
• What are the issues?
• Seriousness of comments
• Reputational risks
• Confidential information
• Commercial impact
• Collateral damage
• Who saw the comments?
• Real or perceived risks?
• Can the damage be quantified?
30. Burness
Edinburgh Glasgow
Case Study Analysis
• What action would you take?
• Would dismissal be fair?
• How could you minimise the risks of a successful
claim being brought?
32. Case Study 3: Senior exits, protecting your
business and restrictive covenants
Morag Hutchison
33. Burness
Edinburgh Glasgow
What are we going to cover?
• What are restrictive covenants?
• Why impose restrictions?
• Types of restrictive covenants
• Enforcement
34. Burness
Edinburgh Glasgow
What are restrictive covenants?
• Restrictive covenants are restrictions on an
employee‟s activities that continue even after the
employment relationship has ended
• Restrictive covenants are usually contained in
employees‟ contracts
• More appropriate for and more common in the
contracts of senior staff
35. Burness
Edinburgh Glasgow
Why do you need restrictive covenants?
• An ex-employee has very limited obligations to
their former employer
• Employees may have knowledge of technology,
strategic information about the employer's
business or customer contacts that they may try to
use for the benefit of their new employer or
business
• Restrictive covenants can be particularly important
during economic uncertainty to protect businesses
37. Burness
Edinburgh Glasgow
Scenario A - Sarah
• Your company provides ATMs to banks and
supermarkets in central Scotland
• Sarah was one of five Senior Sales Managers.
Unfortunately, she was one of the three Senior
Sales Managers who were made redundant during
the recent restructure
38. Burness
Edinburgh Glasgow
Scenario A - Sarah
• Two weeks after she leaves, you see her in a nearby
restaurant having lunch with one of your most
important customers, a large supermarket chain. A
week after that the same client customer calls you to
say they have decided to cancel their contract with
you and move to one of your competitors.
• You subsequently discover from another couple of
your customers that they have also been approached
by Sarah in her new role as Head of Sales at one of
your competitors.
39. Burness
Edinburgh Glasgow
Scenario A - Sarah
• The next day Simon, one of your best Sales
Managers, tells you that he has been approached
by Sarah who has offered him a position with her
at her new company
• You are very concerned about the continuing
impact Sarah is having on your business. What
can you do?
40. Burness
Edinburgh Glasgow
Scenario B - Denis
• You run a private dental surgery in central
Edinburgh. Following a restructure, one of your
dentists, Denis, is made redundant.
• Two months later while you are out to pick up
some lunch you notice that a new private dental
surgery has opened two streets away. You meet
one of your former clients walking out of the new
surgery who is happy to tell you that he was
contacted by Denis who offered him dental care
cheaper than your surgery.
41. Burness
Edinburgh Glasgow
Scenario B - Denis
• You had noticed some clients had stopped coming
to your surgeries
• What can you do to protect your business?
42. Burness
Edinburgh Glasgow
Clause 1.1 Non-compete restriction
• In order to protect the legitimate business interests of
the Company, the Employee undertakes to and agrees
with the Company that, whether on the Employee‟s
own account or as principal, agent, representative,
partner, director, employee, joint venturer, consultant
or otherwise, the Appointee will not during 24 months
following the termination of their employment be
engaged by any business which is or (intends to be) in
competition with the Company anywhere in the [UK].
43. Burness
Edinburgh Glasgow
Non-Competition Covenants
• Employees restricted as a matter of general law
from disclosing confidential information
• The treatment that non-competition clauses have
received by court has changed in recent years
• Name competitors or define the business
• Limit the geographical area
• Appropriate to seniority/salary?
44. Burness
Edinburgh Glasgow
Clause 1.2 Non-Solicitation Covenant
• The Employee will not during the period of six
months following termination of their
employment, in any capacity whatsoever, solicit or
endeavour to entice away from the Company any
business, orders or custom for any products or
services from any customer.
45. Burness
Edinburgh Glasgow
Non-Solicitation Covenants
• No implied restriction on soliciting a former
employer‟s customers
• Dealing with an employee‟s personal influence
over an employer‟s
• Covenant should be restricted to customers with
whom the employee had contact during a specified
period before termination
46. Burness
Edinburgh Glasgow
Non-Solicitation Covenants
• Need not always be limited to customers with
whom had direct contact, could include those
whom employee was aware of if the intention is to
protect either the general customer base or general
goodwill of business
• Clause which attempts to extend the restriction to
potential customers will be harder to enforce
47. Burness
Edinburgh Glasgow
Clause 1.3 No solicitation of employees
covenant
• The Employee will not during the period of 12
months following termination of their
employment, solicit or entice, or endeavour to
solicit or entice, away any employee of the
Company
48. Burness
Edinburgh Glasgow
Non-solicitation of employees
• Reasonably well accepted that preventing a former
employee from soliciting other employees may
protect the employer‟s legitimate interest in the
stability of its workforce
• More likely to be enforceable if the covenant is
restricted to more senior or key employees
• Unlikely to be enforceable if it could apply to
hundreds or thousands of more junior employees
49. Burness
Edinburgh Glasgow
Clause 1.4 Non-dealing covenant
• The Employee will not during the period of three
months following the termination of their
employment have business dealings with or accept
in any capacity whatsoever business, orders or
custom from any customers for any products or
services
50. Burness
Edinburgh Glasgow
Non-Dealing Covenants
• A restriction on solicitation of customers can also
be extended to cover the provision of services
(i.e.. no active steps need to be taken by the
employee, the customer may approach them)
• This broadens the prohibition significantly and so
a court may be more cautious about upholding it
• Enforceability of the covenant will depend on the
interest being protected
51. Burness
Edinburgh Glasgow
Non-Dealing Covenants
• Enforcement may be more likely where the
employer can establish a substantial personal
connection between the employee and the relevant
customers
• A non-dealing covenant will not be enforceable if
it prevents any contact with the relevant business
contacts
• The restriction must be focused on contact that
would affect the employer‟s business
52. Burness
Edinburgh Glasgow
Confidentiality
• Employees are subject to a general duty of fidelity
and confidentiality
• Post-termination, it would seem that this duty only
applies to information that is strictly confidential
and is in the nature of a trade secret
• Duty of confidentiality is found in common law so
does not require an express restraint to be enforced
53. Burness
Edinburgh Glasgow
Enforcing a restrictive covenant
• Has the employee breached the covenant?
• Is that covenant reasonable?
• Has that breach caused loss?
• How should that loss be assessed?
• Has the employee signed the contract?
54. Burness
Edinburgh Glasgow
How do you enforce a restrictive covenant
• Court of Session or Sherriff Court?
• Interim interdict
• Damages for the breach
• Interim interdicts can be very expensive
• Granting of an undertaking
• Deterrent value
57. Burness
Edinburgh Glasgow
Case Study – the Disengaged Employee
Simon is the company‟s IT Director. His role was at risk of redundancy as part of a company
restructure occurring eight months previously. However, in the end, the IT Director‟s role was
not one of those selected to be made redundant. Several of Simon‟s team were made
redundant at that time. Simon earns £120,000 pa.
Following the restructure, the demands on the IT department have become severe. A lack of
responsiveness from the IT team is becoming a drain on the business. Simon appears
disinterested. When asked about the performance of the team, he blames the present situation
on the restructure which he did not support. In the last six months Simon has been absent on
seven occasions, for one day only. He has reported these absences as resulting from severe
stress and anxiety.
The CEO has lost patience with Simon. She has informed the HR Director that it is in the
interests of all concerned that Simon leaves the business. The CEO has also held informal
discussions with Judith, the IT team manager, with a view to offering Simon‟s role to Judith.
Judith is highly respected within the business and the CEO believes that, with Simon out of the
picture, Judith will turn the IT team around.
58. Burness
Edinburgh Glasgow
Options
We will consider the merits of three options to exit Simon from the
business:
1. Commence the company‟s performance management procedure;
2. Dismiss Simon immediately without any procedure;
3. Hold a without prejudice meeting and offer Simon a compromise
agreement package worth £36,000 plus his notice in lieu
Which option would you go for in the circumstances?
Which option do you think would cost the least?
Roughly how much do you think it would cost?
59. Burness
Edinburgh Glasgow
Option 1 - Performance Management Procedure
Fast forward 18 months…
Simon was dismissed four weeks ago following a 17 month procedure. The
procedure was elongated as Simon had a series of sickness absences and he
appealed at every stage of the procedure. The stress of the process aggravated
his condition and the process stalled completely for a period of three months
whilst Simon received in-patient treatment.
Simon, and some members of his team, are upset and angry with the
company's handling of his case. Despite a number of adjustments being put in
place to try to accommodate Simon's condition, they feel more could have
been done.
You have just received notice of the following claims made by Simon against
the company in the ET and civil court for:
• unfair dismissal
• disability Discrimination
• psychiatric injury
60. Burness
Edinburgh Glasgow
Option 1 – Performance Management Procedure
Benefits
• No breach of the company's procedures
• Simon is dismissed fairly on the grounds of incapability and the
company has reasonable prospects of defending the unfair dismissal
and disability discrimination claims brought
• Internal PR: Consistent policy of dealing with employees in
accordance with internal procedures, and values of the company are
maintained
61. Burness
Edinburgh Glasgow
Option 1 - Performance Management Procedure
Negatives
• Time taken to resolve has cost money including pay and benefits throughout, medical
expert fees, legal spend, and temp support
• Management time lost that could have been spent driving the department forward
• Internal PR: the CEO and other senior staff expected a robust and swift resolution
• External PR: Sector press and local media have picked up on the Disability
Discrimination allegations
• No certainty with regard to ET claims from Simon. Company will have to invest in the
defence of the ET claims, not a recoverable cost
• Events have given rise to the PI claim. Could be an expensive additional claim to fight.
Even if insured: Impact on future premiums?
62. Burness
Edinburgh Glasgow
Option 2 – Dismiss without procedure
Fast forward 18 months...
Simon was dismissed 18 months ago causing some internal unrest. He appealed but was
not re-instated.
He raised an unfair dismissal claim and a disability discrimination claim. The company
tried to settle early, but Simon was determined to 'have his day in court'. The company
have already paid £35,000 in legal fees preparing for the case. The case was listed for
six days and has been adjourned twice due to illness.
You have just received notice of the re-listed hearing: it will be heard 18 December
2012 to 7 January 2013, with a break of 13 days over the Christmas period.
Witnesses are unsettled. The company is considering an increased offer of £120,000 to
draw a line under the affair and save further legal fees and the possibility of a substantial
award.
63. Burness
Edinburgh Glasgow
Option 2 – Dismiss without procedure
Benefits:
• Internal PR: Swift and decisive action went down well in some
quarters
• Judith has been an excellent replacement for Simon and has been in
post over 12 months
• The cost of Simon's pay and benefits were saved from the earliest
opportunity and have been 'banked' to cover future settlement or legal
fees
64. Burness
Edinburgh Glasgow
Option 2 – Dismiss without procedure
Negatives:
• The risk that Simon was re-instated on appeal. This would have led to the worst case
scenario - Simon still being employed (possibly with ET claims running anyway)
• ET claims from Simon. Cost of compensation or settlement and legal fees
• External PR: Sector press and local media have picked up on the disability
discrimination allegations
• Internal PR: Internal unrest immediately after the dismissal caused issues that took up
management time
• Management time and emotional drain on those involved
65. Burness
Edinburgh Glasgow
Option 3 – Compromise agreement
Fast forward 18 months...
Simon was dismissed 17 months ago. He didn't accept the first offer of
£36,000 but he signed the compromise agreement in return for an
increased offer of £48,000
Judith has been in post over 12 months. She is now a valued member
of the team.
Simon took the opportunity to take some time away from work. He is
now working successfully in a part-time role. He finds this less
demanding position is more conducive to the management of his
condition.
66. Burness
Edinburgh Glasgow
Option 3 – Compromise agreement
Benefits:
• Internal PR: Swift and decisive action perceived as effective
• The IT Department benefitted by early recruitment of Judith
• The cost of Simon's pay and benefits were saved from the earliest opportunity
and set off against the cost of the settlement monies paid to him
• Confidentiality clauses in the compromise agreement ensured that external PR
wasn't a problem
• No future risk due to the compromise agreement
• Positive outcome for Simon, regarding his health and personal cost
67. Burness
Edinburgh Glasgow
Option 3 – Compromise agreement
Negatives:
• Cost: Upfront payment of £48,000 plus notice in lieu to Simon
• Create expectation/culture of reward for underperformance?
What might have happened?
• Risk of 'being held to ransom' by Simon if he had not accepted the offer. He
could have held out for more or refused to go. (Mitigated to an extent with a
clear strategy to revert to the performance management procedure if this had
happened – put company in a reasonable negotiating position).
• Risk of resigning and claiming constructive unfair dismissal
68. Burness
Edinburgh Glasgow
Option 1 - Performance management procedure
Cost of £77,000
Pay and benefits year 1 30,000
Pay and benefits year 2 15,000
Occupational health input 1,500
Legal fees:
(Legal input on performance management process) 2,500
(Successful defence after six day hearing) 28,000
Total cost: 77,000
69. Burness
Edinburgh Glasgow
Option 2 - Dismiss without procedure
Cost of £112,000
Settlement sum 120,000
Legal fees:
Prep for hearing 35,000
Settlement 2,000
Saving re pay and benefit
Year 1 (30,000)
Year 2 (15,000)
Total cost: 112,000
70. Burness
Edinburgh Glasgow
Option 3 - Compromise agreement
Cost of £46,000
Compensation sum 48,000
4 months notice in lieu 40,000
Legal fees:
Negotiation and CA 2,000
Contribution 1,000
Saving re pay and benefit
Year 1 (30,000)
Year 2 (15,000)
Total 46,000
There must be:Protection of a legitimate interest – seeking to stop a former employee from using or damaging something that legitimately belongs to the former employer (For example – trade connections (goodwill) or trade secrets and other confidential information)That protection must be reasonable – the employer should impose a restriction that is no wider than reasonably necessary to protect its interestInvolves:-limiting the covenant; considering the length of period that the covenant will run for as well; and geographical extent covered by it.
The treatment that non-competition clauses have received by court has changed in recent(ish) years:-Thomas v Farr plc and another the Court of Appeal upheld the High Court's decision that a 12-month non-compete clause was enforceable. Mr Thomas was the managing director, and the High Court found that he had sensitive confidential information which would be helpful to the competitor he was going to work for when devising a strategy to undercut his former employer. Solicitation of clients was unlikely to be carried out personally by Mr Thomas (but by staff below him), so there were practical problems in trying to police a non-solicitation clause, which did not provide adequate protection.In TFS Derivatives Ltd v Morgan [2004] EWHC 3181, the High Court upheld a non-competition covenant on the basis that a restriction on solicitation would be difficult to police, and therefore might not effectively protect the employer's business interests (
Dealing with an employee’s personal influence over an employer’s customers may be dealt with by a covenant preventing the employee from soliciting those customers post-terminationImportant factors to consider include:- employee’s level of seniority within the organisation; extent of their role in securing new business;loyalty or otherwise of customers in the relevant market; and length of similar restrictions in contracts of other employersNeed not always be limited to customers with whom had direct contact, could include those whom employee was aware of if the intention is to protect either the general customer base or general goodwill of business.
