Crunch time

With many businesses feeling the economic pinch, the likelihood of redundancies increases. How can you avoid claims from employees in these situations?

Redundancy

If you no longer need as many employees to do a particular job, or if you are closing down a branch, then you may have to make some people redundant. You are allowed to use redundancy as a reason to dismiss employees, but you must follow a “fair procedure”. Some key considerations:

• Make sure that you choose employees fairly. You may need to think carefully about whether individual employees or a whole class of workers are “at risk” of redundancy.
• Use fair selection criteria, and make sure that they are not discriminatory (for example, selecting part-timers could discriminate against women).
• Make sure you use the proper consultation procedure – if you are making more than 20 people redundant in a 90-day period there are special rules.
• Make sure the final dismissal procedure complies with the statutory minimum requirements.

Redundancies could also result from an insolvency procedure, for example as part of an arrangement to save the business. The normal rules on consultation and procedure still apply, although unfairly dismissed employees would have to wait in the queue of unsecured creditors if they made a successful Tribunal claim.

What price loyalty?

Bankers UBS recently settled a dispute with Vestra Wealth LLP after employees left UBS en masse to join Vestra in competition. What can you do to stop senior employees taking advantage of their knowledge about your business, if they try to set up a rival concern?

A duty of fidelity is implied into all contracts of employment, but it only protects you against disloyal acts done while a person is still in your employment. It could be a breach of contract, for example, for an employee secretly to collect company information so that they could use it for profit once they left.

Once an employee has moved on, they must still keep confidential information secret, but the definition of “confidential information” can be quite limited. It does not normally cover things like customer lists, for example. If you want to stop employees exploiting your trade connections after they have left, you must get their written agreement to restrictions that operate after termination of employment (known as “restrictive covenants”). Restrictive covenants must be carefully drafted: if they are too onerous a court will refuse to enforce them.

In many circumstances, “soft” employee relations skills can do more to ensure that you keep your workers’ loyalty.

Statutory updates

From 1 October 2008:

• The National Minimum Wage increases as follows:

Adult rate (age 22 and over): £5.73

18-21 year olds: £4.77

17-18 year olds: £3.53

• Employers do not need to display a paper copy of their Employer Liability Insurance certificate, and can now provide copies to employees electronically.

• Additional directors’ duties come in under the Companies Act 2006. The new requirements include duties to avoid conflicts of interest; not to accept benefits from third parties, and to declare an interest in transactions.

From 5 October 2008:

• Women on Additional Maternity Leave (AML) are now entitled to the same terms and conditions as they were during Ordinary Maternity Leave (OML). This means that entitlement to benefits other than remuneration continues for the full 52 weeks of OML plus AML.

• Adoptive parents on Additional Adoption Leave (AAL) are entitled to the same terms and conditions as they were during Ordinary Adoption Leave (OAL).

From 27 November 2008:

• Employers who wish to employ non-EEA overseas workers must be registered with the government as sponsors. Application is possible at any time, although the Home Office has recommended that anyone who needs to be able to issue certificates of sponsorship from the beginning of the scheme should apply before 1 October. Transitional arrangements for existing work permit holders can be found on the UK Border Agency website at: http://www.bia.homeoffice.gov.uk/sitecontent/newsarticles/transitionalarrangements2and5