NOTE: Nothing in this story is intended as legal advice to the reader. Rather it is intended to serve as a lesson about why you should always engage good specialist employment advice before you commence a restructure, discipline or performance management process. No, not your mate Jono who you flatted with at Uni and now works in corporate finance law - someone who specialises in employment law. You wouldn't go to a hand surgeon to operate on your brain, don't go off and do that with your legal advice. Some of the details have been changed to protect the identities of the people and organisations involved.
Vario does not provide specialist employment legal advice, but we do have experience with engaging specialists in that area of law through change processes. This experience means we can engage that advice in a way that is appropriate, timely and cost-efficient. As with most endeavours, keeping things on track starts at the start and it's much easier and cheaper than trying to clean up a mess later.
SERIES OF EVENTS
- The organisation initiated a review of the area for which an existing staff member was responsible.
- At the beginning of the year, the organisation brought in a contractor to conduct work which was part of an existing staff member's job description. The CEO invited the staff member to the briefing of the contractor, then uninvited them. The review's had not been completed at this time.
- The review was finalised but no serious issues were raised and there was no recommendation to restructure.
- In a casual corridor conversation on a Friday afternoon, the CEO said to the staff member "can we catch up next week for a free-and-frank conversation?". The staff member was happy to agree, thinking this was just an honest conversation and they enjoyed what they thought was a really positive relationship with the CEO. The CEO then said "oh, and you can bring a support person if you want, because HR are going to be there". The staff member then asked "is this about the review?" and the CEO said "no, no, it's nothing about that".
- On the following Monday, the meeting was set for Tuesday. On Tuesday morning, after meeting with a lawyer (the equivalent of the flatmate Jono) the CEO e-mailed to say that the meeting would be "without prejudice", if the staff member was going to bring a lawyer to let them know and they could push the meeting out to Thursday. They didn't say what the meeting was about.
- In a subsequent e-mail, the CEO said the meeting was about the review (contradicting what they had said earlier), but offered no detail.
- The meeting never happened - a settlement was negotiated. This was a fortunate outcome for the organisation (although they paid more than they would have otherwise), because had it proceeded further they would have been humiliated by public proceedings and ended up paying even more. At the end of it all, the employee left still not knowing what the problem was which gave rise to the whole mess. Note that no issues or concerns had ever been raised in their performance reviews.
A FOUNDATION OF GOOD FAITH
Employers (and employees) are required to act in good faith towards the other party. That means not being misleading or deceptive, being responsive and communicative, raise issues or concerns as soon as possible and, before making a decision which may affect an employee, the employer must give them sufficient information to understand the proposal. Put simply, the good-faith requirement is to be honest, fair and respectful.
LESSON 1: DON'T START WITHOUT STARTING
By bringing in a contractor to do work that the employee would ordinarily have done (without discussion with them), the CEO wrong-footed themselves from the outset. The review of the employee's area had not yet been concluded and, when viewed in hindsight, this action reinforced an impression that they had already made a decision about wanting to get rid of the employee.
As an employer, even if you are being up-front and honest, understand that whatever you do today could compromise your position down the track. Trying to clean things up later is like trying to get the toothpaste back into the tube. So, be clear and careful at every stage.
LESSON 2: GET SPECIALIST ADVICE EARLY
There was a huge advice asymmetry in this story. The CEO had gone to "their mate Jono". Following the corridor conversation, the employee had reached out for experienced advice. In the end, their advice team grew to a team of 5, including specialists with 30+ years experience in employment law from both sides of the equation. The employee was guided in how to continuously strengthen their position throughout what was to follow and meet their own good-faith obligations. This, in turn, led the employer to compound their errors with further mistakes in the process, making them even more vulnerable.
LESSON 3: DON'T GET TOO CLEVER
A without-prejudice conversation is one in which the content of the conversation cannot form the basis of grievance or subsequent legal action. These are sometimes initiated by a party to an employment relationship when an employment problem has been identified.
In this case, the employer had not identified a problem - they were attempting to raise issues for the first time under the cover of a without-prejudice meeting. Sounds clever, right? No. It wasn't. The employee received strong advice (with supporting judgements) that the Authority would take a dim view of this approach by the employer. So, the employer had, in fact, made themselves more vulnerable rather than less.
LESSON 4: BE CAUTIOUS WITH REVIEWS
Although they never made it clear what issues in the review they wanted to discuss with the employee, the employer in this case was attempting to use the review to discuss moving the staff member on. The problem in this case was that nothing in the review raised anything serious and made no recommendation for restructure.
Keep in mind that your terms of reference for any review are as important as the review itself and how it is conducted. Get advice early and don't try and weaponise a review - that is unlikely to end well.
LESSON 5: YOU'RE FOLLOWING A PROCESS OR YOU'RE NOT
Processes around restructures, performance management and discipline protect both parties. They might not be pleasant to lead or to go through, but they are a necessary part of the job. As this case was clearly not a restructure but arising out of issues or concerns the employer were going to claim they had, they should have:
- Written to the employee, setting out their concerns, inviting them to a meeting to discuss those concerns and encouraging them to seek advice and arrange appropriate representation.
- The meeting should have been scheduled with sufficient time for the employee to consider the concerns, seek advice and arrange appropriate representation.
The employer in this case was going half-and-half - verbally inviting the employee to a meeting, without telling the employee what that meeting was about, but saying they could bring a "support person" if they wanted to. In the employer's mind, this was clever and put them in a stronger position - it really didn't - they were not meeting their legal obligations as an employer, both in terms of the good-faith expectations and in terms of due process and natural justice.
LESSON 6: THE MECHANICS OF AN EXIT
The organisation and its CEO were fortunate that things ended the way it did - with the employee walking away with an acceptable settlement. It could have gone very differently. They were in a strong position to take a grievance, get a modest pay-out for hurt and humiliation, hit the employer with their legal costs, keep their job and stay right where they were. Remember, while nobody gets rich out of employment disputes and you might think as an employer that a few grand is worth moving someone on, you might end up paying out a few grand and the employee not moving on.
At one point, they suggested an unacceptably low pay-out for the employee to walk away, with no formal agreement in place. The employee could have taken the money, then raised a grievance for wrongful dismissal and applied to the Authority for reinstatement. Never conclude exit negotiations without an Agreement under s149 of the Employment Relations Act 2000, ensure you have received specialist advice in its drafting and that the employee is given sufficient time to seek independent advice prior to executing the Agreement.
CONCLUSION
This case study is great to learn from because the employer made mistakes at every possible juncture. The lessons we can take from it all include:
- GET SPECIALIST EMPLOYMENT ADVICE!
- Know and meet your good-faith obligations
- Be aware that anything you do today could compromise your position later
- Don't try to be clever and avoid due process
- Be careful with reviews
- If you're not following the process 100%, you're not following it at all
- Ensure any negotiated staff exit is based on a formal Agreement