24 January 2017

Employment Law SOS

Tracey Marsden of Nabarro LLP looks at redundancy pay and malicious staff rumours.

We are a small manufacturing company based in a down-on-its luck former mill town in Lancashire, and are trying are hardest to combat growing competition from abroad. Unfortunately, it seems as though we will need to cut salaries amongst most of our staff to make ends meet. We don’t want to go down the redundancy route, as our workforce are loyal and many have been with us for many years; plus, finding work in the area will be tough for many of them, who all have highly specialised, but very niche, skills. How do we broach the subject of pay cuts with them, and what alternatives can we offer?

Employers cannot unilaterally change their employees' terms of employment without the express agreement of the employee. Decreasing salaries without agreement will be unpopular and would amount to a constructive unfair dismissal. However, in the circumstances described, there are means by which the change can be made notwithstanding the lack of specific agreement. There are three basic options:

1.Impose the lower salaries without agreement and hope that the affected employees will continue to work and therefore accept the change "by implication". This option runs the risk that affected employees will work "under protest" or resign and claim constructive dismissal and is not the recommended approach.

2.Seek written agreement to the salary cuts from your workforce. If you clearly communicate that the business won't survive otherwise, and you run a clear and open process, demonstrating that you have considered alternative options, then agreement may be forthcoming from the majority of employees. If necessary offer to review the situation as business improves or offer some other benefit as compensation for the change, provided of course the business can afford to do so.

3.If some employees refuse to accept the change, you can dismiss and re-offer the same roles on revised salaries. This may be unfair, but as long as you go through a full and proper consultation process you may be able to justify the dismissal as being for sound business reasons. You will need to give contractual or statutory notice of termination of the old contract in order to avoid a potential claim for wrongful dismissal, but otherwise the risk would be low, particularly if the new contract was accepted.

If you take option 3 above, if you propose to terminate the existing contracts of 20 or more employees, then you will have certain additional obligations: you will need complete an HR 1 form and submit it to the Secretary of State for BEIS, and you will need to comply with certain collective consultation obligations. If the proposal to dismiss involves between 20 and 99 employees, you have to notify BEIS and commence consultation with the appropriate representatives of the affected employees at least 30 days before the first dismissal takes effect (which in the case of consultation means at least 30 days before you can give notice to terminate); and 45 days for 100 or more affected employees.

I have been employed at a major manufacturing site for five years. For four and a half of those, I have enjoyed my time immensely. However, in recent months I have started noticing other members of staff giving me snide looks and making comments about me behind my back. I finally confronted them about it during a lunch break, and it transpires that a rumour is circulating that I took cocaine at a recent staff party. It’s obviously untrue, and I don’t know where the rumours have come from, but the other staff claim they have compelling video evidence. As far as I know, senior management are unaware that anything is going on, but I’m worried that if and when they do find out, my neck may be on the line. Is it best to speak to those in charge before the rumour gets to them, or wait it for it to run its course and die out naturally?

It sounds as though you have been, at best, the unlucky subject of a case of mistaken identity or, at worst, the target of a malicious act of workplace bullying.

You could decide to let the rumour run out of steam. As you rightly point out though, this risks the appearance of guilt, if and when the rumour reaches your managers. Furthermore, it may be unpleasant and stressful working under conditions where you are worried about the prospect of the rumours reaching management. Your employer will want to have any malicious behaviour by your colleagues brought to their attention.

It sounds as though the most prudent approach will be for you to raise an informal or formal grievance with your employer. If you feel able to raise this with your line manager or another senior manager who you trust, that may be an appropriate way forward as he/she may be able to nip matters in the bud with your colleagues without the situation escalating further. At that stage, it may transpire that this was just a joke.

If you feel that matters have already become more serious than that, you could raise a formal grievance. Your employer's HR department should be able to provide you with the grievance procedure. This will set out the proper process for you to follow. Generally, you will have the chance to set out your grievance in writing, and have a 'grievance manager' appointed to oversee an investigation into the allegations and alleged behaviour. The grievance manager may call witnesses and consider any available evidence. Such evidence will likely include this video which, if it exists, will presumably confirm that you have been misidentified or that the situation has been misunderstood.

If any wrongdoing is found to have taken place on the part of your colleagues, then they may be punished appropriately. Even if no specific wrongdoing can be identified, you will have the opportunity to place on record your denial of any wrongdoing. However, if there is an appearance of wrongdoing on your part, then you need to be aware that the employer may decide to take disciplinary action against you.

60 Second Guide... Pay rises

Employers generally have no duty to provide a pay rise to their employees, except in limited circumstances (for example, when employees receive minimum wage and the minimum wage threshold is increased, or when the employee has a non-discretionary right to a pay rise in their contract by individual or collective agreement).

However, pay rises are a good way to incentivise and retain your workforce, especially in competitive industries.

If an employer wishes to increase an employee's pay, this will amount to a variation of contract, to which the employee will invariably agree. In theory, such an agreement can take place verbally, but it's always a good idea to document any change to an employee's terms in writing.

Employment contracts may make reference to a review of salaries on an annual or other periodic basis. Such clauses will ideally, from the employer's perspective, be worded so as to ensure that any increase is discretionary. If no discretion is permitted, for example because the employee is entitled to salary increases with inflation, then the pay increase should be awarded.

Where there is a recognised trade union, pay awards are likely to be the subject of a binding collective agreement for those covered by the trade union's collective bargaining rights. Collective agreements can sometimes provide for pay awards to be set for a number of years.

When conducting salary or pay reviews, care should be taken to avoid any potential claims for discrimination. If increases are awarded on a discretionary basis, there is a risk that bias and favouritism could dictate the extent of each employee's increase. It is therefore a sensible approach to implement clear and measurable metrics to indicate when employees should be awarded discretionary pay rises. This should help to avoid any inadvertent unfairness.

Adam Offord

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