Economic Cycles and Employment Law

In this article Will Burrows looks at the changes we have seen over the last year to the UK economy, and specifically how these have affected employment. He then looks ahead to the coming months and outlines why employees need to get prepared…

Economic cycles and employment law-min

Few would doubt that 2016, by modern standards, has been an extraordinary year in terms of global politics and world events. We have seen the continuing (and seemingly never-ending) crisis in the Euro zone, the migrant crisis, the Brexit vote, Donald Trump’s candidacy and election as President of the United States of America, the increasing polarisation of European politics and the ongoing war in Syria. As a keen political observer who, like most people, has no particular political affiliation, 2016 has been the equivalent of being a passenger in one of the driverless cars that are presently being road-tested: despite being constantly reassured that everything is being managed remotely, you get the sneaking suspicion that you are a crash test dummy in a trial and error experiment.

If 2017 proves to be one such ‘experiment’ as some fear, there are going to be inevitable adverse effects on the job market in the United Kingdom. Unfortunately, there will doubtless be many businesses looking to restructure and make redundancies over the coming months – therefore at Monaco Solicitors we are expecting a busy year as we continue to advise a diverse range of clients on their specific rights within the area of employment law.

Will your sector thrive or dive?

Because of the increasingly uncertain economic, regulatory and political situation, at Monaco Solicitors we have seen certain trends in employment practices in the UK. In fact, I would argue that Monaco Solicitors is something of a bell-weather in this regard given that we act for employees across all sectors of the economy and we can see certain trends developing in the ebb and flow of employment. For example, if the City of London is doing well, then Monaco Solicitors is instructed in more discrimination cases, restrictive covenant cases and team-moves which indicate the sector is growing.

If the City is experiencing tough times, however, then Monaco Solicitors is instructed on an increasing number of redundancy cases and settlement negotiations.

So, what is the team at Monaco Solicitors seeing as we leave 2016 far behind and enter what may prove to be the year that sets the tone for the next decade?

Well, it is my view that while some sectors of the economy are going through a mini-boom, others are facing a slump or realigning their business models to adapt to the uncertainty that 2017 and beyond promises to bring.

FINANCE AND BANKING

In the financial services industry record low interest rates have meant that those desks focusing on financial products (that rely upon certain interest rate activity) have been facing cuts and therefore redundancy situations. Some will point to the Bank of England’s decision to lower interest rates further still to just a quarter of a percent after the referendum as the reason for this, but really it was just the final straw after years of low interest rates and the City finally accepting that they are here to stay for the foreseeable future. Furthermore, it is trite to observe that 2017 will see more uncertainty for the City as the UK enters discussions with the EU following the triggering of Article 50.

We expect to see many banks realigning their workforces with EU facing roles perhaps in danger of going to branches within the EU if the UK leaves the Single Market. But where there is change there is opportunity, and while the City already works in emerging markets, I would expect the rate of jobs focussed on these areas, particularly Asia-Pac, increasing as the UK seeks to look to the rest of the world to maintain its growth. Therefore, there may be fewer jobs in London, but more overseas.

MANUFACTURING

Manufacturers and suppliers that import goods from abroad, especially from economies that use the US dollar or are pegged to it, have suffered from the effects of the fall of the pound against the American currency. This has again, I observe, led to some redundancies in the manufacturing sector and in industries that supply some niche construction services which rely entirely upon foreign imports for their business. This effect on the construction sector is, however, likely to be tempered if the government follows through on its promise to build hundreds of thousands of new homes. Conversely, we have seen positive news as a consequence of 2016 as well. In the car industry, for example, both Nissan and Jaguar Land Rover have not only committed to the UK, but also indicated that they will build new lines here, creating thousands of new jobs.

Men on a construction site

Ironically, the fall in the value of the pound may lead to investment in supply chain provision to the large car manufacturers based in the UK, which would undercut foreign imports, creating more jobs in the North and Midlands. The technology sector has also experienced some good news with Google building a new headquarters in London and creating thousands of new jobs, as well as the fledgling UK Fintech (Financial Technology) recruiting heavily.

RETAIL

The retail sector may also be adversely affected if the fall in the value of the pound leads to price rises, and those increases mean consumers are put off making purchases. Already we are seeing supermarkets and other large retailers realigning their workforces through restructures and redundancies and I would expect more to follow in the next twelve months.

So we’re seeing that 2016 has divided industry sectors into winners and losers, and that 2017 may see an exacerbation of this effect with more job losses in sectors looking to lose out over Brexit, and new opportunities for those other sectors likely to benefit from the move away from the European Union.

The big issues in 2017…

So what does all this mean for employees facing an uncertain future? Well, for those of us who went through the 2008 crash there were two words that became ubiquitous: restructure and redundancy, with the former inevitably leading to the latter (although I don’t expect to see anything like the level of turmoil of job losses we experienced in 2008 – 2010). This means that employees affected by restructures need to read up on their rights during this process and in particular have regard to matters such as the offer and acceptance of alternative roles, trial periods, redundancy payment entitlement, redundancy processes (including scoring and pooling), TUPE and unfair dismissal. During the 2008 – 2010 financial crisis there were a lot of claims made in the Employment Tribunal on the basis of unfair selection for redundancy and redundancy following a transfer (TUPE).

Alternative role or redundancy?

Since 2008, the law as it relates to restructures and the offer of suitable alternative employment in place of redundancy has moved on. If, following a restructure, an employer determines that an employee’s role is no longer required, but offers them a new role instead, the test as to whether that role is suitable is a subjective test based on the employee’s personal circumstances and their particular job. Therefore, even if the new role does not represent a loss in salary, if it represents a loss in status or involves work of a particular nature which is unacceptable to the employee, the employee in question is still able to reject that offer of a new role and instead claim a redundancy payment and their notice pay.

Often at Monaco Solicitors we are instructed by clients whose employer has decided that because they have rated a role as being similar or suitable, then that is the acid test and no challenge may be made to that determination. This is an incorrect position to take as the offer of suitable alternative employment is not based on the employer’s determination as to the suitability of the role, but the employee’s. This is vitally important as while some employees would want to take an alternative role in order to avoid unemployment, others wish to take advantage of a redundancy payment and leave to pursue a career elsewhere. It is also worth noting that whenever an employer makes an offer of alternative employment following a restructure, they are obliged by law to offer a four week trial period for the employee to test the new role. At any time during that four week period the employee can decide that the role is not for them and they can then claim a redundancy payment. Sometimes the employer disputes the employee’s right to a payment, and this is when the employee needs to seek urgent legal advice as to their rights.

Claims of unfair dismissal in redundancy situations

Many of the redundancy claims in the past were based on predetermined scores, incorrect scoring and incorrect pooling (the latter of which is difficult to prove unless it is beyond the bounds of reasonableness), and while employers, lawyers representing businesses and HR consultants have learned from previous mistakes and the legal decisions that followed, it is highly likely that 2017 will generate further redundancies and therefore further mistakes and unfair treatment. It is therefore crucial for all employees facing a restructure or redundancy to read up on their rights and take legal advice in cases where they feel they may have been the victim of unfair dismissal.

TUPE: Transfer of undertakings

A great deal of TUPE cases from 2008 – 2010 dealt with transfers during insolvency and a whole body of case law sprung up overnight. The result of this was that it is now the law in the United Kingdom that employees affected by a transfer from an insolvent company to a company which purchases the insolvent company (or the assets thereof) do have TUPE protection and so do transfer to the new company. It is also worthy of note that the purchasing company cannot order the administrator of the insolvent company to make redundancies, thereby attempting to avoid liability for transferring staff. The only case in which TUPE does not apply in insolvency situations is when the insolvent business is being liquidated, at which point the employees do not transfer if other companies purchase the assets of the liquidated business. These are all important points to bear in mind if 2017 proves to be a turbulent year for certain businesses.

Conclusions

Due to the global economic and political climate, it is highly likely that some employees in the City of London (especially those in EU facing roles), those working in retail and those with roles in manufacturing will need to start reading up on their rights.  If their employer starts to make the internal changes that it feels are necessary to adapt to the world in 2017, it would be smart for employees to begin taking legal advice as soon as they can. It is vital that employees facing restructures and redundancy understand their rights and ensure that they are not being short-changed by their employer.

Our resources and services

There are many forms and template letters available on our website to download free of charge that will be of use to many employees. However, those employees facing redundancy or those who have been offered a settlement agreement should call one of our experienced employment lawyers who will be able to advise them whether they may be able to increase this settlement via professional negotiation.

 


Next steps

If you want to talk to us about your work situation, including your next steps and whether you deserve a better deal, just get in touch on 020 7717 5259 or request a free consultation, no obligation.