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HomeLegal NewsTerminating Employment Contracts Post Covid-19

Terminating Employment Contracts Post Covid-19

Article kindly contributed by: Jag Brar at Richmond and Barnes Solicitors

The past 2 years of economic uncertainty bought upon by the coronavirus pandemic has to a large degree bought upon a degree of cooperation and understanding by employers towards employees reliant upon protecting their jobs. It has been encouraging to see a high degree of moral responsibility demonstrated by the vast majority of employers, however, the recent debacle involving P & O Ferries that comes shortly after the lifting of lockdown measures has reintroduced an old flavour of unscrupulousness that will leave a lingering effect.

This unfortunate experience stands out as a stark reminder of the abusive use of power held by senior figures in the so-called name of business interests. It is however not only the employees at the service front of an organisation’s operations that can be affected by unscrupulous decisions but also senior and executive staff members who can also be ambushed by aggressive manoeuvres from an overzealous employer. Let’s not however forget that we are emerging from a very difficult phase into perhaps a more uncertain phase with the knock-on effects from the Ukraine-Russia war. Many employees would be grateful that they still have jobs whilst some employers are genuinely struggling to run their businesses effectively whilst maintaining the same employees on pre-existing terms.

There are however a few considerations to have in mind tomaintain a balanced approach on terminating an employment contract. The most common form of terminating an employment contract during an economic crisis is redundancy. Employers however must be mindful of how they fairly select individuals to become redundant and justify
those dismissals properly for a legitimate economic goal. The mere desire to re-employ alternative staff members at a lower wage will rarely if ever be considered a legitimate economic goal. By contrast closing a branch or department could well be justified if there was no possibility of redeploying the same staff internally in other parts of the business.

The method for choosing which employees are to be made redundant also requires careful planning to avoid any prejudicial claims for unfairness. Common methods used are:
· Last in, first out
· Voluntary redundancy
· Disciplinary records
· Staff appraisals, skills, qualifications and experience

The following table illustrates the formula used to calculate the basic award that all employees are entitled to:
a. 1 and half weeks’ pay for each year of employment in which X was not below the age of 41
b. 1 weeks’ pay for each year of employment in which X was below the age of 41 but not below the age of 22
c. Half a week’s pay for each year X was below the age of 2

There is currently a maximum award of £16,320 payable under this statutory provision.
a. 1 and half weeks’ pay for each year of employment in which X was not below the age of 41
b. 1 weeks’ pay for each year of employment in which X was below the age of 41 but not below the age of 22
c. Half a week’s pay for each year X was below the age of 22
Once a decision has been made on selection for redundancy, the next stage is to focus on redundancy packages. Redundancy packages ought to be rather straight forward if
the selection process has been conducted fairly. The first phase is to calculate statutory redundancy pay. In addition to the basic award, some employees may be entitled to additional payments as a compensatory award. This aspect of the redundancy package can become more complex and requires careful consideration. Currently there is a maximum that can be claimed under this provision in the sum of £89,493 or 52 week’s pay whichever is lower. The following (non-exhaustive) types of loss can be generally claimed under this provision:

· Loss of past earnings
· Loss of future earnings
· Pension loss
· Post dismissal increases and pay rises
· Loss of statutory rights
· Loss of long notice period
· Loss of holiday pay
· Employment expenses

There is also a duty to mitigate losses and make allowances for deductions such as contributory fault and an employee’s performance during the contractual period. These areas can often get contentious when parties are not able to reach an agreement on a fair package having differences of opinion on factual matters with the potential of having to litigate the matter at court.

It is always more desirable to reach a resolution as litigation most certainly will be stressful and expensive and often outstrips any benefits. However, that is not to suggest that in all instances an employee or employer should just throw the towel in to avoid confrontation. There could be legitimate underlying concerns that have led to the decision to terminate the employment that would have a material significance on the overall outcome if the matter were to proceed to litigation. Some of those considerations could extend beyond the scope of a redundancy package as outlined above if it can be established that there is a material breach of contract or duty that has been fueled by an improper and unlawful motive or resulting in catastrophic detriment. In these circumstances it would perhaps be prudent to have thorough legal advice by a trained profession to fully understand the legal complexities of any relevant decision.

We are able to assist both employers and employees facing difficult contractual disputes and have often been successful in helping parties reach a compromise agreement before the matter gets out of hand. If you have any challenging situations in which you require legal assistance, please do not hesitate to get in touch and we will be delighted to offer our assistance. Equally, we able to assist parties and indeed encourage parties to reach a sensible financial package before contacting us whereupon we be happy to provide independent legal advice for the purpose of settling a compromise agreement.

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