These are uncertain times in the professional practice sector. Nothing illustrates this more dramatically than the recent closures of significant law firms like Halliwells and Dewey & LeBoeuf LLP. However, since the current recession first began to bite there has been a steady trend of downsizing and redundancies across all sectors in the professional practices arena. This has continued in 2012 with large legal practices such as Shoosmiths and Herbert Smith announcing redundancies and the recent announcement by KPMG that just under 3% of its “rank and file” staff members were at risk of losing their jobs, equivalent to nearly 340 posts. This has certainly tallied with my own recent experiences having been advising clients in the insolvency practitioner, accountancy and legal fields on the termination of their employment has resulted such restructures.
It is not only the larger organisations that are feeling the pinch, with record numbers of smaller firms closing due to economic pressures.
In such circumstances one of the first cost-cutting measure firms will take in the face of economic pressures is to consider staff numbers. What has surprised me in my recent experience in such situations is the number of often quite basic mistakes that are being made by professional practices when implementing redundancies, leaving them exposed to risk of potential claims in the employment tribunal in respect of unfair dismissal claims from ex employees.
There are a few basic steps that any organisation should bear in mind when going through any process:
- Think about the numbers. If you are proposing to dismiss 20 or more employees on the grounds of redundancy at one establishment in any 90 day period then you will have obligations to inform and consult with employees on a collective basis. This will mean consultation over fixed timescales with trade unions when they are recognised or with elected employee representatives where there is no union. Collective consultation is a potentially complex process with potential liability for “protective awards” of up to 90 days’ gross pay per employee for getting it wrong. With a quarter of your annual wage bill resting on the outcome, this is definitely one area where proper legal advice is a must.
- Carry out a fair selection process. This will involve properly identifying the right groups of employees from which to select, applying a matrix of objective selection criteria and ensuring that those criteria are applied fairly. In my experience, this is often an area where well-meaning but poorly advised firms can often trip up, using subjective selection criteria or producing scores that are unsupported by any evidence.
- Carry out a fair individual consultation process. This applies whether or not collective consultation is required. As a minimum, employees should be given an opportunity to see their own scores and the criteria and be informed of any suitable alternative employment (not just within the firm itself but in any firm within the wider group – another common mistake).
- Provide a right of appeal. Although redundancy is excluded from the ACAS Code of Conduct on discipline and grievances, as a matter of basic procedural fairness, an appeal should normally be offered.
- Consider sector–specific issues. Depending on the profession, there may be specific issues that arise. For instance, in the legal sector, trainee solicitors have two separate contracts, the employment contract directly with the firm and the training contract, to which the Solicitors Regulatory Authority is also a party. In the unfortunate circumstances where a redundancy of a trainee is considered, SRA consent is required to terminate the training contract. In the accountancy sector, there will often be issues regarding recovery of training fees in respect of exams taken towards professional qualifications. I have recently acted for an individual whose firm tried, and were unable (after my intervention), to recover the cost of course fees because of a badly-drafted clause in his service agreement dealing with such repayments.
With failures to undertake fair selection and/or consultation giving rise to the potential unfair dismissal arising and failure to comply with collective consultation obligations giving rise to protective awards, professional practices considering staff reductions can save themselves considerable headaches by taking advice at the early stages of such proposals.