The requirement to restructure a workforce can be driven by a number of factors such as changing customer requirements, new technology or a realisation that the existing structure has become outdated and inefficient.
Restructures do not necessarily result in redundancies. There may be some job losses, but the main purpose of a restructure is to move employees across to new roles and job descriptions that better meet the needs of the business. However, from a legal perspective, the procedures for carrying out a restructure and a redundancy exercise are similar.
The employer hopes that employees will accept the new roles, but there is no guarantee of this. It is therefore important to realise at the outset that every employee with more than two years’ service has unfair dismissal protection and, if the process is not handled well, claims could result.
The key point is that the employer cannot unilaterally impose substantive changes. So, in the event that an employee is not agreeable to move into a new role, the employer must terminate the existing contract of employment and simultaneously offer continued employment under the new terms. This is known as termination and re-engagement or, in the popular media, “fire and rehire”.
British Gas carried out an extensive termination and re-engagement exercise with field engineers, many of whom did not accept the new terms, leading to a mass return of vans.
At the individual level, employees with more than two years’ service who do not sign up to the new terms will have potential unfair dismissal claims. The employer, however, provided there is a good business reason for the restructure and the correct procedure has been followed, will have a defence.
If 20 or more employees are affected then the employer is required to undertake collective redundancy consultation with elected representatives of the employees. This is the case even where the employer, at the outset of the process, does not expect there to be any job losses. This is because a termination of employment brought about as a result of a termination and re-engagement exercise is considered a “no fault” dismissal and the wording of the collective redundancy consultation legislation is wide enough to encompass this.
It’s important to get the collective consultation piece right as failure to consult representatives in the prescribed manner can result in an award of up to 90 days pay per affected employee. This is actual pay, not subject to the statutory redundancy cap of £643.
It may seem odd that in circumstances where the employer does not envisage job losses, it is nonetheless necessary to comply with collective redundancy legislation, but that’s how it is.
“Fire and rehire” is considered by the union movement to be a euphemism for imposing less favourable terms on staff. Labour have expressed an intention to legislate against the practice and, with it appearing increasingly likely that they will win the election in 2024, employers considering a restructure would be well advised to proceed with it in the coming months.
If you are considering a restructure, we can offer practical advice and legal support on all aspects of restructuring, from initial strategy to defining the process and finally to implementation.
For further information on this or for any other employment law advice please send an email to advice@sherrardslaw.comor speak to one of our team on 01273 834120.
