At Fox Williams, we lived the financial crisis up close and personal. So, what we did learn from that experience that is relevant today?
- Normal employment laws continue to apply
- Don’t tear up the contract
- Don’t just rely upon “people like you”
- Take a fresh look at the strengths and weaknesses of your people
- Your world will not be the same again
- Don’t lose your rag
1. Normal employment laws continue to apply
The magnitude of the crisis is so overwhelming and the imperative to protect the business so strong and urgent, that HR actions may have been taken without following the normal processes and procedures, on the flawed assumption that the crisis justifies short cuts. But, slow down and pause: all the usual employment laws continue in full force and effect, and if disregarded, there will be a tail of tribunal and court claims to deal with once lockdown is over, just as there was in 2009.
Here is one example where taking a short cut might prove to be expensive later on.
When more than 20 people are to be made redundant within 90 days, collective consultation with employee representatives must begin more than 30 days before the first redundancy is due to take effect. Where more than 90 people are to be made redundant, consultation must begin more than 45 days earlier. There are detailed rules regarding the nature of the consultation.
This requirement to consult does not apply where there are “special circumstances which render it not reasonably practicable” for the employer to comply with the requirements. Employers would be forgiven for thinking that the current pandemic would amount to special circumstances which would justify employers failing to meet all the consultation requirements, but we would sound a strong note of caution. Based on previous case law, establishing special circumstances is an extremely high bar to overcome and has not succeeded even in many insolvency situations.
Our advice is to carry out consultation properly if faced with the sad reality that redundancies will be necessary and, more generally, to comply properly with the usual procedures required by employment law.
In a drive to cut costs, employers may ignore or decide to breach the terms of employees’ contracts, sometimes on the assumption that the employees won’t do anything about it because they’re scared they will lose their jobs altogether.
A case in point was Attrill and others v Dresdner Kleinwort Ltd and Commerzbank AG.
A number of Dresdner Kleinwort Ltd employees had been promised bonus payments from a bonus pool established just before their bank merged with Commerzbank, but when the financial crisis struck Commerzbank sought to avoid the commitment by making payment of the bonus conditional upon financial performance and subject to a material adverse change clause.
The Court of Appeal ruled in favour of the employees by stating that the introduction of the new condition was a breach of the implied term of mutual trust and confidence and that the bonuses should be paid in full and not at the 90% reduction which the bank had sought to make.
3. Don’t just rely upon “people like you”
When the going gets rough, senior leadership teams band together; they can feel more comfortable tackling the crisis in the company of friends and “people just like them”. And, if difficult decisions to cut jobs are needed, they may want to retain people close to them on whose support and loyalty they feel they can rely.
This can have the effect of pushing to the periphery individuals who are “different” from the decision takers; in the immediate aftermath of the financial crisis this phenomenon created a lot of work for us, as we handled a number of high value discrimination claims involving women, gay and ethnic minority employees who got pushed out of their jobs by straight white male leadership teams.
Our advice is stop and think. Is the proposed selection of individuals for redundancy/new roles fair and, crucially, based on objective criteria? Are you really retaining the right skills and attributes needed for the next phase? Is there any unconscious bias underlying your decision taking?
4. Take a fresh look at the strengths and weaknesses of your people
In 2008, we were all left with the impression that one or two people at the top of the financial services industry did not understand the intricacies of modern banking and had struggled to evaluate the risks their institution had been taking.
As was shown then, there’s nothing like a crisis for separating the wheat from the chaff.
Who has really shone in this crisis, demonstrating resilience, the competence needed to operate effectively in a remote environment and the tenacity and loyalty to deliver results by going above and beyond what is being asked of them?
And, who has been revealed to be mainly a good political operator, great at upward management and political manoeuvring, but not so great at getting the job done? As with all groups of people, offices often have an in-crowd, generally to be found clustered around the water cooler or in neighbouring bars and coffee shops gossiping about their colleagues. But they can’t do much of that now and have instead to focus on demonstrating competence in the role.
As to which, how is everyone getting on with the IT? Those lacking in IT know how and unable to make best use of the technology at their disposal might well be “found out”, having previously relied upon junior members of staff to handle much of this for them. The stock of those with good IT skills is rising.
Our advice is to set aside previous perceptions of the value individuals add to the organisation and re-evaluate the skills and qualities of your people so that correct, fair and legally compliant decisions are taken about redundancies, retention, promotion, pay and roles and responsibilities. This might be a welcome development for those highly competent employees who just get their heads down and deliver what’s required of them all without a lot of fuss or self-promotion.
5. Your world will not be the same again
The financial crisis provoked much soul searching as to what went wrong and who was responsible for it, setting in train the huge increase in the regulation of the sector as a whole and the individuals working in it, most of whom are now subject to the Senior Managers and Certification Regime.
It is already clear that this crisis is provoking a huge re-evaluation of ways of working, including the merits and disadvantages of home working, the pros and cons of flexible hours of work and what is good and bad about video calls and interacting with colleagues through technology.
Our advice is get ahead and lead the way by working out what will be the optimal way of working for your business and your people and then communicate your plans to your staff and consult them to ensure you bring everyone along with you. This will minimise friction and disputes in the future around these issues, especially discrimination claims from those who need flexibility to balance work with demands at home. Employers may find it much harder to justify refusing requests for agile and flexible working in future. By getting ahead you could make your organisation a happier place to work for everyone.
Bullying allegations rose during the financial crisis, some of which resulted in grievances and litigation.
Nine weeks into lock down, the intense remote way of working without normal breaks and interactions is getting to people. Stress levels are rising; and video calls are not the always the best way of resolving relationship issues which in real life would benefit from a face to face chat over a coffee.
So, when you feel like expressing your full and frank views to a colleague, our advice is log off and take a walk outside. No one will know where you are, and by the time you’ve smelt the roses and decided “it’s just a job” you will have the calm head and sense of proportion needed to tackle the situation, without prompting an accusation of bullying.
Contact us
The authors of this article are happy to respond to queries from current or prospective clients of the firm. If you do not wish to instruct the firm, we hope you find this article and others we have written useful and you may wish to refer to the ACAS website https://www.acas.org.uk/. If you wish to instruct us, or to discuss instructing us, please contact one of our Employment partners directly or by using the contact form here and we will be pleased to discuss how we can assist you. If you are a journalist seeking further information, please contact us via marketing@foxwilliams.com or by phoning 020 7614 2648.
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