Susanne Foster and Clare Murray
ICAEW special workplace
Handling the employment relationship life-cycle – practical tips and pitfalls for professional managers
Managers usually participate in every aspect of the employment relationship, from recruiting and interviewing new hires for their team, through to terminating an employment relationship which may have gone sour and dealing with any employment law litigation fall-out.
Employment law may, at times, be viewed by some managers as notoriously involved and cumbersome, hindering the actual job at hand. However, understanding a business’s employment law obligations and liabilities from the outset and treating (and training) staff in accordance with those rights will help managers – particularly those working in professional services, where high-performing employees are essential to the effective running of a business – to get the best out of their employees, communicate effectually about sensitive HR issues and avoid time consuming employment law difficulties arising in the first place.
So, what are the key legal and practical issues of the employment relationship cycle of which managers need to be aware and how can managers avoid difficulties arising the first place?
In this article, we provide a high level overview of practical pointers for managers when dealing with the three key stages of an employment relationship life-cycle – namely recruiting, managing and terminating.
The Beginning: Recruitment, getting it right from the outset
Before even starting the recruitment process, all of those involved should have received equality and diversity training, particularly in recruitment. A written record should be retained of who has received this training and when. Equal opportunities policies and training can help set minimum standards of behaviour expected from staff and minimise the risk of employment law claims. If the policy is implemented with regular training and publicity within the business, and the business takes action where there are policy breaches, it can also help a business demonstrate to an Employment Tribunal that they took all reasonable steps to prevent discrimination.
When recruiting use a formal recruitment process with standardised forms, where possible. Carefully prepare the recruitment criteria (e.g. a job description (purpose of the job, tasks and responsibilities and reporting line etc)) and a person specification (e.g. the required skills and experience, listing those criteria which are essential and others which are desirable). How flexible is the role? Can it be carried out part-time, flexibly, or on a job-share basis? A business may well get asked these questions by a potential candidate during the recruitment process, so should have carefully considered its response in advance. A business should also be able to justify, if needs be, why any role needs to be full-time and office based.
Protection from Discrimination
Protection from unlawful discrimination because of:
- gender reassignment,
- marriage and civil partnership,
- pregnancy and maternity,
- race (which includes colour, nationality, ethnic or national origins, and potentially caste (following a 2014 Employment Appeal Tribunal Case)),
- religion or belief,
- sex (i.e. gender) and
- sexual orientation,
applies to every stage of the employment relationship, including recruitment and job adverts (it will also apply to former employees). Therefore be conscious of the language used in any advert or during the recruitment process (e.g. avoid terms such as “senior”, “mature”, “experienced”, “young” and “energetic” etc which could marginalise those with a particular protected characteristic i.e. age) and keep the recruitment criteria objective and discrimination-free.
During the interview process, if possible, try and ask all the potential candidates the same questions and keep detailed (objective) notes of their replies. By asking similar questions, it should be easier for the business to compare candidates and avoid inferences of discrimination.
Bear in mind that at a later date, any documentation, including manuscript meeting notes made during the interview process (or at any stage of the employment relationship), could be disclosable as part of any employment litigation, were a potential candidate to raise concerns about the recruitment process. Employees also have the right to request from the business certain information about them by submitting a data subject access request under the Data Protection Act 1998. This information could include emails, text messages on mobile phones and hand-written documents kept in a manual filing system from which the employee’s (or potential new hire’s) details are easily accessible. The results of the request often cause significant embarrassment to employers and can provide ammunition to employees or candidates with potential employment claims, so remain objective and circumspect as to what you document.
Health & Disability Questions
There are only limited circumstances in which a business can ask potential candidates about their health or any potential disability, although an applicant can be asked whether they have any special requirements which need to be made to facilitate any interview, e.g. wheelchair access etc.
The Job offer
Any formal job offer should be made in writing and should be conditional on the business receiving:
- Satisfactory references;
- Proof that the candidate has permission to work in the UK; and
- Evidence of any necessary qualifications.
The candidate should also be asked to confirm whether or not they are bound by any post-termination restrictive covenants from previous employers (ie provisions which would prevent them freely working for your business such as a non-competition provision, a non-solicitation of former clients and staff etc provision which, depending on the role the new candidate is to play in your team, could impede any job they take with you). If they are bound by such obligations, and subject to any confidentiality obligations which bind the candidate, ask the candidate if you can see a copy of these restrictions to ascertain if they are likely to impede the work the business wishes them to undertake. Bear in mind that new employers can be sued if they induce an individual to breach restrictive covenants with a former employer or conspire with that individual to injure his or her former employer.
Ensure any contractual paperwork with the new candidate includes all of the details you are legally required to provide within 2 months of starting employment. This includes (but is not limited to) information such as salary details, hours of work, holiday and sickness pay etc.
If the role is to be carried out on a part-time basis, the candidate should not be treated any less favourably than a permanent employee (although the business can adopt a pro-rata principle when considering this), unless this can be objectively justified with clear evidence. Fixed-term employees also have protection from less favourable treatment as well.
Consider whether you want to include a probationary period in the employment documentation (including a probationary period review with extension if necessary). Often these are for a period of between three to six months, with the ability to extend if necessary.
Look ahead now!
It is important at the start of any new employment relationship to consider the consequences of the employee departing the business at a later date. Think about whether you want the potential recruit to be bound by any post-termination restrictions (as they may have been when they joined your team). It is best to incorporate these provisions in the contract from the outset and they should be regularly reviewed throughout the employment relationship. If the candidate is promoted during their career with you, consider at each promotion whether any restrictive covenants need to be updated; take legal advice on those new covenants and how to ensure their enforceability as far as possible.
Consider the inclusion of a garden leave clause in the contract. Such clauses usually require an employee not to work during part or all of their notice period and to usually remain at home. Such provisions can help the business by allowing e.g. client and staff relationships to be consolidated whilst the employee is away from the workplace and not working for a competitor.
Apart from the typical contractual provisions e.g. pay, benefits, sick pay, pension etc, other important provisions which should be considered at the outset and incorporated into the contract where necessary, include provisions relating to confidential information and intellectual property.
The Middle: Effectively managing and supporting your staff
Awareness of key employment rights, including family-friendly policies
During (and even at the start of the employment relationship) managers should, at a minimum, have an awareness of the key statutory and contractual employment law protections available to their employees. By having an understanding of these rights and potential liabilities for the business, it should help minimise the business’s (and the manager’s) risk of employment law claims as far as is possible.
Broadly speaking, employees have two sets of rights: contractual rights (typically set out in their contractual documentation), which usually bring with them lesser known implied contractual terms such as an employee’s duty of fidelity and a duty to obey lawful and reasonable orders (there are others). Equally, an employer is also bound by certain implied terms depending on the circumstances. The second set of employment law rights are statutory and are further outlined below.
Key Statutory Rights
As an example of some of the key statutory rights available, employees have (amongst others) protection against unfair dismissal, discrimination because of the protected grounds listed above, protection from detriment or dismissal from having blown the whistle on wrongdoing, working time and equal pay rights etc.
Focusing on discrimination and whistleblowing specifically, an employee does not need to have worked for a business for any specific length of time before they can bring a discrimination or whistleblowing claim (discrimination protection applies to job applicants, as previously mentioned). Both discrimination protections and whistleblower detriment protections apply to former workers. For example, if you provide a bad reference to a former employee for a discriminatory reason or because they have previously blown the whistle, that former employee is likely to be able to bring a discrimination or whistleblowing claim for detriment against the business even though you no longer employ them.
It is also worth remembering that in certain circumstances, both discrimination and whistleblowing claims can also be brought against individuals, as well as employing companies. This means that managers can potentially be named as respondents in tribunal claims – and be held personally liable – for discrimination or whistleblowing.
The primary award for an employee who is found to have been unlawfully discriminated against or is successful in a whistleblowing claim, is loss-based compensation (subject to the employee’s duty to try and reduce their losses by looking for another job). In certain circumstances, other awards may be made, including an injury to feelings award which can be between £600 and £30,000.
In order to bring an unfair dismissal claim, in most circumstances (subject to certain limited exceptions) an employee will need 2 years’ service (1 year if they were employed before 6 April 2012). In a successful unfair dismissal claim, a tribunal can order reinstatement or reengagement of the employee, with an award of back pay; it is though rare in practice. The more usual remedy is compensation, comprising a basic award (based on the employee’s age, length of service and weekly pay currently capped at £479 per week (as at 6 April 2016) and a loss based compensatory award subject to a cap of the lower of £78,962 (as at 6 April 2016 or 52 weeks’ pay. The employee will also be under a duty to mitigate those losses. The award made by an Employment Tribunal may be relatively modest, in the latest Employment Tribunal published statistics (April – June 2015) the median unfair dismissal was £6,955, but this does mean there were as many awards above this figure as below it.
Do not forget family friendly rights in the workplace! Eligible employees are entitled up to 1 year’s maternity leave, as well as maternity pay for up to 39 weeks, two weeks’ paid paternity leave and comparable adoption provisions. Shared parental leave applies to births or adoptions on or after 5 April 2015 which allows parents to share leave. The Government plans to extend the shared parental leave and pay scheme to working grandparents by 2018, with a consultation due to take place on this during the first half of this year.
Other leave provisions include, up to 18 weeks’ unpaid parental leave per child and reasonable time off work to deal with an emergency involving a dependent.
There are also statutory provisions which relate to any flexible work request. The right to request to work flexibly applies to all employees with 26 weeks’ continuous service.
Appraisals / Performance Reviews
Conduct regular appraisals with employees to give them constructive feedback of their performance. Allow performance reviews to be a two-way dialogue, allowing employees to voice any concerns that they may have and formally document the review. It may make it difficult in the future when terminating an employment relationship if a glowing appraisal is received when they are undeserved (the same goes for the giving of unmerited pay-rises and bonuses). Be honest and objective with your employee on their overall assessment.
Proactively deal with performance and disciplinary issues
Whilst addressing performance issues head on can make both the employer and employee uncomfortable, letting them fester unaddressed usually only makes the problem worse in the long-run. Poor performance does not tend to go away on its own. Initially – depending on the severity of the performance issue – try and address any performance issues with an informal discussion and follow up. If this fails, more formal meetings and monitoring may be required (with these steps being formally documented and training and support offered).
If the business decides to commence a formal performance management or disciplinary process then the ACAS Code of Conduct should be followed in cases of misconduct or poor performance. Failure by the employer to follow the code can result in an uplift of up to 25% on any compensation awarded at an Employment Tribunal.
The End: Ending the employment relationship and a manager’s options
The process to follow when ending an employment relationship will depend on the relevant legal framework. From a statutory fair dismissal point of view there are a number of potentially fair grounds for dismissing an employee, including, (but not limited to):
- An employee’s conduct at work;
- An employee’s capability or qualifications (which includes poor performance, ill-health, lack of necessary qualifications);
- Redundancy (which may, depending on the number of employees being made redundant, require a more thorough consultation process with employee representatives or, if applicable unions (compared to smaller scale redundancies));
- Illegality (e.g. breach of immigration status)
- “Some other substantial reason” (a catch-all category which does not fall under the headings above e.g. business reorganisations falling short of redundancy).
If an employee with qualifying service (or who falls into an exception so no minimum length of service is required) is dismissed for any other reason other than those permitted by law, then the dismissal will be unfair.
Process is key
An employer also has to follow the correct process (which varies depending on the reason for dismissal) and act reasonably when dismissing an employee. They should also ensure that no action is taken that could breach any entitlements that an employee is owed under their contract. Failure to follow the correct process, acting unreasonably, or terminating for an unlawful reason, could, if the employee has the requisite service (or is exempt from the service requirement), result in an unfair dismissal claim.
Failure to terminate in accordance with the employee’s contractual entitlements could lead to a claim for wrongful dismissal (e.g. if the business fails to pay the departing employee their contractual notice period or outstanding sums owed e.g. a bonus).
If any dismissal is for a discriminatory reason then there could also be a potential discrimination claim. Acting in breach of an employee’s contract on termination could result in any post-termination restrictions (e.g. non-competition covenants, non-solicitation covenants etc) falling away leaving the business exposed to competition from their departing employee.
Agreeing mutually acceptable terms
At times it is preferable to reach a negotiated confidential settlement with an employee from a practical and commercial point of view, rather than going through a formal process. The approach taken will depend on several factors, including:
- the legal framework;
- the business’s attitude to risk;
- the cost of the termination process and replacing the departing employee;
- the timing; and
- the business’s needs.
It may be possible, in certain specified circumstances, for a business to hold discussions with or make offers to their employees regarding the ending of that employment relationship without the risk of those discussions being admissible in any future unfair dismissal litigation. These are known as pre-termination negotiations. However, the application of the pre-termination negotiations rule is narrow in scope and employers should exercise caution when relying upon its use
Above all, it is important to take advice before taking any steps to dismiss an employee in order to put the business in the strongest position going forward. If settlement is reached, terms should be contained within a settlement agreement. The employee will need to take legal advice from an independent lawyer to make the agreement binding and to waive legal claims.
The bottom line
In summary, treating employees and candidates reasonably and consistently, following well documented, fair internal processes, and having up to date contracts and policies on which staff are regularly trained, and which are properly supported, monitored, and enforced, will go a long way to minimising employee risk to your business and to protecting your bottom line!
This article by Susanne Foster and Clare Murray first appeared in the ICAEW special workplace report in February 2016.
This article is not intended as legal advice; specialist advice should be sought in particular circumstances.