This article was originally written for and featured in Personnel Today.

Around 100 fixed income traders based at the London office of the Swiss bank UBS suffered the embarrassment of arriving at work for a normal day only to be told, out of the blue, that their services were not needed and they were being sent on “special leave”. These events took place against a backdrop of announcements that UBS is to shed 10,000 employees overall, with up to 3,000 jobs likely to go in its London offices. Joanne Owers looks at the legal issues involved.

Employees not placed at risk of redundancy

According to press reports, the traders, instead of being allowed access to their desks, were met at reception and escorted to see HR to be given a very impersonal letter headed “Dear Colleague”, informing them that they were not “required to continue to perform their duties” and were being placed on “special leave”.

While the Bank took steps to stress in that communication that the employees’ employment was not being terminated, that they had not been put on notice nor had they been placed at risk of redundancy, no reason was actually given for the bank’s actions. It can only be assumed that these rather draconian steps were being taken by UBS to keep these particular staff away from the trading floor and prevent access to bank and client funds while their fate is decided.

Even by City standards, these rather brutal actions at this early a stage, before any collective consultation had even taken place with the bank’s UK Employee Forum, seem rather precipitate and extreme. Had they occurred in any other sector, an outcry would almost certainly have ensued.

Most employers, in our experience, are fearful of the legal consequences of sending an employee home, even once an individual consultation period has started, because of the message this sends as to the genuineness (or otherwise) of a consultation process, let alone taking this action at this stage. Despite UBS’s protestations that the employees had not been put at risk of redundancy, in the context in which this action was taking place, and absent any specific reason for the employees to be given an instruction not to work and to remain at home, what other inference could reasonably be drawn than that these unfortunate employees will be first to receive redundancy notices?

A calculated risk

Many will regard UBS’ action as overly hasty and ill-advised but, in reality, the bank will have taken a calculated risk on the basis that the affected traders’ options, insofar as employment law protection is concerned, may be relatively limited.
Breach of contract?

As always, the traders’ first port of call will be their own employment contracts. Do those contracts expressly allow UBS to send employees home and provide no work for them to do in circumstances where they have not even been served with notice or are not subject to disciplinary investigation? If not, UBS will be in breach of contract. The traders could also argue that there is an implied duty for UBS to provide them with work and not just pay them at a standard rate while they are on “special leave” if their earnings fluctuate (as is likely to be the case), depending on the work they actually do. If that is the case, and the traders are underpaid as a result, they can “stand and sue” on their employment contract and claim damages for arrears of pay and/or for unlawful deduction of wages. In view of the number of employees involved, that type of action could cause real problems for UBS.

Constructive dismissal?

Many of the traders will undoubtedly have been thinking that the treatment they have received must either have been a fundamental breach of contract by itself or a breach of the implied duty of trust and confidence, which may give them the option of resigning and claiming constructive dismissal, which would have the advantage of releasing them from any post-termination restraints. However, even if the traders can circumvent the fact that merely warning of future redundancies is unlikely to amount to a fundamental breach of contract, should they elect to resign before they have even been put at risk of redundancy, they will forfeit any enhanced redundancy package which UBS are almost certain to offer to smooth the way to a compromise agreement.

A successful claim for unfair dismissal may also be something of a pyrrhic victory for these employees in terms of compensation. If UBS can show that their positions were genuinely redundant and they have been fairly selected, the fact that such hasty action has been taken which will almost certainly lead to claims that any subsequent consultation process is a sham, a compensatory award may subsequently be limited to compensating for procedural unfairness only, which is unlikely to excite a City trader.

This was a calculated risk that may well pay off!

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