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Global workforce reorganization part 5: discrimination, diversity and inclusion considerations

  • United Kingdom
  • Employment law

30-09-2020

Workforce restructuring raises a number of significant legal issues, whether that restructuring is altering working arrangements and terms, merging businesses, moving to lower-cost jurisdictions, establishing new centers of excellence or re-sizing the workforce through more traditional downsizing projects. 

However, often overlooked are possible discrimination pitfalls, which can be costly, with the potential to obliterate the very savings intended to be realized by the workforce reorganization. Devoting the necessary time and attention to "doing it right" is therefore a worthwhile investment. Looking beyond the reorganization exercise, such exercises can often also present a real opportunity to meaningfully advance diversity and inclusion initiatives on a longer-term basis.

How can global employers ensure that their restructuring programs minimize the risk of discrimination? What associated action can employers take to advance equality and inclusion for all employees?

In this Part 5 of our series of materials on global workforce reorganizations, we therefore focus on discrimination challenges associated with global reorganizations and highlight some of the practical steps to support and advance longer-term diversity and inclusion initiatives. For other materials in this series, see links on our Global workforce reorganization series Boxset page.

Downsizing projects

In many jurisdictions, legislation can often restrict the freedom of design of global reduction in workforce exercises, resulting in a non-uniform process globally. Different laws can shape the permissible course of action, either through principles that must be adhered to or prescribed selection criteria and processes. In addition, the overlay of any discrimination laws can further influence the process.

Many jurisdictions now have some discrimination laws, in the majority of cases protecting against discrimination based on gender, pregnancy, age, ethnic origin and disability. Some jurisdictions also offer wider protections, for example including protection against discrimination based on sexual orientation or identity, gender re-assignment, and/or national origin.

See our at-a-glance table of some sample jurisdictions and protections below.

Is this protected by discrimination law?* Brazil China France Germany Hong Kong India Italy Netherlands Russia Singapore South Africa Switzerland UAE (excluding DIFC/ADGM UAE (DIFC/ADGM UK USA
Sex
Pregnancy and maternity
Martial status × × × × ×
Gender re-assignment × × × × × × × × ×
Sexual orientation/identity × × × × × × ×
National orgin × ×
Ethnic/racial origin
Religion or belief ×
Disability
Age × × ×

*Additional protections apply in some jurisdictions/localities

**In the UAE (but excluding the DIFC and ADGM free zones), there is no one law which deals with discrimination/anti-harassment and instead limited protections can be found in the UAE’s various laws and/or the primary UAE Labour Law (as recently amended).

In addition to general discrimination laws, many jurisdictions offer further rights to  protected classes of employees through protection against dismissal and the existence of mandatory selection criteria and rules.

Germany is an example of this, where the criteria of age, length of service, family maintenance obligations and disability must be applied to the exclusion of any others, when selecting which employees will be terminated. In the Netherlands, the so-called proportionality principle, which is a last in first out principle applied by age groups, is prescribed. In contrast, in the UK the use of the criteria required in Germany or the Netherlands could be deemed to be discriminatory and subject to legal challenge.

It is also important to consider whether any categories of staff should be excluded from or treated differently for the purpose of the selection exercise. Many jurisdictions have such categories of employees with special protection, including pregnant or breastfeeding employees, employees on maternity or other family-related leave, parents of young or disabled children, employee representatives or similar. For example, in the Czech Republic, a redundancy notice may not be served during the protected period in relation to certain protected categories of employees.

Further, many jurisdictions offer additional protections for certain groups of workers through minimum quotas and affirmative action requirements. In China, for example, companies must either ensure that the number of disabled employees as a proportion of their total workforce meets the minimum proportion prescribed by reference to local regulations or make contributions to a disabled fund in accordance with a prescribed formula. In South Africa, larger employers are required to take affirmative action measures to ensure that suitably qualified people from designated groups have equal employment opportunities and are equitably represented at all occupational levels in the employer’s workforce.

Disparate impact

Aside from direct discrimination, some jurisdictions, for example the UK and the US, also have laws prohibiting any indirect discriminatory impact on employees in particular protected groups through actions taken by companies, including in relation to reorganizing workforces and alternative work arrangements.

In the US, disparate impact assessments, using non-legislative guidelines that are relied on by the courts as a source of technical information, are carried out to assess whether a practice that is applied consistently to all groups produces a statistical disparity against a particular group. To be in a position to defend a claim of discrimination if the assessment identifies a material disparate impact, the employer must be able to demonstrate that the measure creating that statistical disparity (for example, the application of certain selection criteria) is job-related, consistent with a business necessity and that there was no reasonable alternative that would meet the same aim but result in less adverse impact.

Is it unlawful? Brazil China France Germany Hong Kong India Italy Netherlands Russia Singapore South Africa Switzerland UAE (excluding DIFC/ADGM UAE (DIFC/ADGM UK USA
Direct discrimination*
Indirect discrimination / disparate impact* × × ×
Positive discrimination / affirmative action* × × × × × × ×
Inequality of pay × × ×
Harrassment / violation of dignity*
Victimization × × × ×
*Limited in some jurisdictions to certain protected classes of workers

Employers implementing a reduction in workforce is an obvious example for where particular groups of employees could be disproportionately impacted by the selection criteria applied or other elements of the process. For example, selection criteria that include absence or length of service, which could disparately impact disabled or younger employees.

However, less obvious disproportionate impacts should not be overlooked.  Different working arrangements, particularly those imposed on a mandatory basis, including remote working, could result in negative disparate impact on different groups of workers if appropriate safeguards are not put in place. For example, disadvantage through inadequate physical working conditions, insufficient learning opportunities for younger employees starting their careers or impact on the mental health of working parents in the juggle between remote working and caring for children and the blurring of the lines between work and home life.

Reorganization planning should therefore consider indirect impacts and whether any disproportionally affected groups are legally protected. Further, if any such disparity is identified, consideration should be given to ways of minimizing the disparity. A robust, documented business justification for the measure will be key to minimizing the risk profile of any legal claims. 

Wider diversity and inclusion considerations

As firms emerge from the significant impacts of the pandemic, many organizations are recognizing that they will need to be more resilient, responsive and agile to protect the business from future disruption. Further, acknowledging that with many studies concluding that creating an adaptive and inclusive culture is key to growth and creating sustainable competitive advantage, diversity and inclusion should continue to form part of an organization’s key strategies.

Multi-national employers are also coming under growing pressure from clients and customers to demonstrate their global diversity standards and from bodies such as the International Labor Organization to demonstrate wider standards than those contained in local discrimination laws.

As a result, many organizations are taking steps to review diversity and inclusion programs, to identify and address any gaps and ensure that existing initiatives remain fit for purpose. Where new working arrangements or structures have been implemented, paying particular attention to remuneration and benefits, processes to assess contribution and performance, promotion criteria and attrition, will be key. Further, testing the effectiveness of processes through use of diversity and inclusion surveys can be a useful step in parallel to monitoring progress and encouraging new ideas and suggestions.

Data gathering

There is often a tension, however, between being able to assess any disparate impact in a restructuring exercise and having quality data available to be able to adequately do so. Organizations wishing to look beyond the reorganization exercise and use the opportunity of the reorganization to reset or refocus diversity and inclusion initiatives often find it difficult to meaningfully do so without data on their workforce demographics.

In some jurisdictions, obtaining and reporting certain information is legally required. In the US, for example, all private employers with over 100 employees have a legal requirement to submit reports to the Equal Employment Opportunity Commission regarding employees’ race, ethnicity, gender, and job classification.  

Beyond certain information to enable tax, social security obligations and/or reporting obligations to be met, there are few jurisdictions that impose any positive obligation on employers to obtain data from their workforce to enable diversity and inclusion to be monitored. In Brazil, for example, companies are legally required to collect ethnicity and nationality data to comply with reporting and workforce composition requirements. However collecting the data for the different purpose of analyzing the diversity and equal opportunities in the labor environment would require separate freely given, express, unambiguous and informed consent.

Further, employers are often restricted from lawfully obtaining information from employees due to data privacy requirements. When combined with low levels of voluntary disclosure, this can often result in a major barrier to designing and meaningfully advancing diversity and inclusion initiatives.

Despite these limitations, in many jurisdictions, if a careful process is used, there are often permissible ways of lawfully collecting relevant data relating to workforce diversity, although often with data privacy-directed conditions, including anonymized data, safeguards to protect the data and truly voluntary participation with informed consent. 

Summary

Possible discrimination pitfalls should not be overlooked in any reorganization exercise. Whilst there will often be different impacts on different groups of employees, ensuring that impacts are properly analyzed and local laws understood that may provide additional protection to such groups will be key to the risk profile of the project. Failing to do so could not only impact on the realization of any intended costs savings, but could also see management time being absorbed in disputes, employee relations damage and impact on reputation at a time when organizations are seeking to focus on rebuilding and reinforcing.

Having in place the necessary data to properly assess impact on different groups can be notoriously challenging. Again, understanding local requirements and limitations will be key. Where consent is required to the collection of data, employers should be clear and transparent about why they need to collect the data and how it will be used and protected. Looking beyond the reorganization exercise, having quality data available will be vital to designing effective diversity and inclusion strategies.

Numerous studies have demonstrated positive links between diverse workforces and maximizing profitability, performance, innovation and productivity. Further, that access to the widest pool of skills and talent helps to achieve competitive advantage. As businesses take steps to tackle the economic impact of the pandemic and look to reorganize workforces, failing to evaluate what foundational changes may be necessary to address any workplace inequities and barriers to inclusion could therefore have wider long-term implications.

Diversity and inclusion strategy should therefore continue to be a priority as businesses navigate through the effects of the pandemic. Whilst the sands continue to shift in terms of the pandemic itself and the many negative impacts, diversity and inclusion is a key area where positive impact can be realized. 

For further materials in this series of materials on global reorganizations, see our Global workforce reorganization series Boxset page.

Our extensive global footprint means that we are well placed to help employers, wherever they have a presence. Our teams across the world have been supporting employers to steer through the legal and practical employment implications of the global shift in the working landscape.

Please contact the following partners if you require advice and assistance:

Global:

Diane Gilhooley
Hannah Wilkins

Elizabeth Graves

Constanze Moorhouse

US:

Scott McLaughlin
Michael Woodson
Michael Hepburn

Marlene Williams

Asia:

Jennifer Van Dale 
Jack Cai

Europe:

Frank Achilles
Deborah Attali
Valentina Pomares
Ingrid van Berkel
Wijnand Blom