Restructuring and redundancies: what should you do as a small law firm?

Making redundancies or restructuring your staff is difficult for both business owners and employees. Understanding the law and planning the process carefully are key to a successful redundancy process.

Changing terms and conditions of employment

It is worth considering whether you could obtain the cost savings you need without needing to go through a redundancy process. An employer can only change terms and conditions if allowed to under the employment contract (for minor changes), or by consent of employees.

However, in the present climate, employees may be more likely to consent if they believe it may save jobs.

If employees refuse to consent, you may need to consider dismissing and offer re-engagement on new terms. You will normally have to rely on “some other substantial reason” and demonstrate you have a “sound business reason” for wanting to change terms and conditions. You will also need to follow a consultation process to try to obtain consent before deciding to dismiss.

Under case law, factors that may determine the reasonableness of an employer’s actions include:

• the employer’s motive
• the employees’ reasons for rejecting change
• whether reasons for change were clearly communicated
• whether there was genuine consultation
• whether the majority of employees accepted change

Redundancy

For a redundancy dismissal to be fair, there must be:

• a genuine redundancy situation
• a fair procedure leading to the redundancy dismissal

A fair procedure is likely to include:

• individual consultation
• a fair selection process, which will include deciding on a selection pool and selection criteria
• the right to be accompanied
• a right of appeal

Placing employees at risk of redundancy should only be considered if no alternatives are available, such as:

• a recruitment freeze
• reducing agency or temporary staff
• offering sabbaticals or unpaid leave
• offering reduced hours
• keeping employees on furlough

Read our guidance – there is a Coronavirus Job Retention Bonus of £1,000 for keeping previously furloughed employees in employment to the end of January 2021

Individual consultation

The process could look like this:

• day 1 – the employee is placed at ‘risk’ of redundancy at the first consultation meeting
• days 4–7 – second consultation meeting
• days 10–14 – final meeting where redundancy is likely to be confirmed
• appeal

You must consult with employees who are at risk of redundancy. Before COVID-19, this was normally done in person. For an employee who is furloughed or self-isolating, consider meeting by video conference or phone. You must consult on ways to avoid the need for redundancy, and any suitable alternative employment.

As part of the individual consultation, you must disclose the individual’s score (if applicable) and how that score was arrived at. You should give the individual the opportunity to challenge their score.

Potential risks in a redundancy process

1. Stating an employee is “redundant” before their redundancy is confirmed – loose language may be used against you. You should state that the employee is at “risk” and you are in consultation with them before making a decision.
2. Failing to provide lists of any other vacancies you may have in your firm.
3. Failing to get the pool ‘right’ first time.
4. The alleged bias of assessors (I suggest you use at least two assessors if your firm is large enough).
5. Failing to provide copies of selection criteria and scores.
6. Failing to provide a written statement of redundancy calculation (this may amount to a criminal offence).
7. Failing to offer an employee on maternity leave a “suitable available vacancy” if one exists.
8. Previous appraisals being inconsistent with the scores on a skills matrix.
9. Standard redundancy letters being inconsistent with what actually happened at consultation meetings.
10. Allegations of discrimination on the ground of a protected characteristic – in particular, failing to make reasonable adjustments regarding the selection process for employees with a disability.

Legally, you will need to show that you have acted reasonably throughout. Hopefully, following a fair procedure will also mean any redundant employees feel that they have been treated fairly at a difficult and emotive time for all involved.

For the legal background on redundancy, read our practice note on Reorganising your business: Employment law implications and the ACAS guidance on redundancy.