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Coronavirus – Reduction of workforce implementation– Global

  • Global
  • Coronavirus - Workforce issues

02-06-2020

The COVID-19 pandemic will inevitably leave some employers with no alternative but to consider a workforce reduction as a result of the consequent downturn in demand in some sectors.

As highlighted in our previous briefing, Global reduction of workforce planning, planning a workforce reduction across a number of jurisdictions must take account of the complexity of the application of different laws. In implementing such an exercise, employers will further encounter a number of new practical challenges specifically arising as a result of the COVID-19 pandemic, including informing and consulting employees who may be continuing to work remotely or are otherwise absent from the workplace.

Key considerations for redundancy consultation

Getting consultation right is at the heart of a successful workforce reduction process.

In some jurisdictions, a failure to carry out proper and meaningful consultation may render the entire procedure void and dismissals unfair. Aside from the legal ramifications from a failure to consult, there are wider employee relations considerations too. Maintaining the trust and commitment of the workforce will be key in the current environment, where employees are often working under different and challenging conditions. In many jurisdictions, certainly across Europe, it is also necessary to notify the authorities in advance of proposed collective redundancies, which will entail careful planning.

Thought should be given to how much information should be provided to employees and representatives, whilst ensuring cross-border consistency. Too little information and the consultation may not stand up to challenge, too much and staff may feel overwhelmed. Having said that, in some jurisdictions, such as France and Spain, very detailed and lengthy documents – an economic note to the Social and Economic Committee in France and a technical report to the authorities and employee representatives in Spain – are a requirement of the process.

Data protection and confidentiality is another consideration when sharing information with staff or representatives who are working at home. Is this data being processed lawfully and kept securely in accordance with local data protection principles and requirements?

Ensuring a fair workforce reduction procedure will present a particular challenge to employers where employees work remotely or are absent from work due to sickness or caring for others. Employees may already be anxious as a result of the exceptional circumstances and the added uncertainty of their continued employment must be factored into the implementation of consultation processes. Dismissals at this time also have the potential, more than ever, to generate negative press and consequently impact on businesses’ reputation.

How can an employer carry out effective consultation where employees are not physically in the workplace and how can the risk of any challenge to the effectiveness of consultation be minimized?

Effective planning and allowing flexibility in the process and timeframes are likely to be required, with the practicalities of how to communicate most effectively tending to vary by organization.

Employees who undertake globally mobile roles are likely to be well used to communicating virtually. For others, it may be necessary to provide suitable equipment and training to facilitate that consultation. Further, more comprehensive documentation and support may need to be provided to managers to support them in implementing the process.

In some jurisdictions, employers must consult with trade union representatives, employee representatives or works councils when carrying out collective redundancies. This may entail electing employee representatives who are now working remotely and ensuring that they understand their roles and are properly supported.

It will often be advisable to implement protocols for conducting virtual meetings in order to effectively communicate with employees, works councils and other employee representative bodies. Such protocols should cover issues such as the provision, confidentiality and security of information, the conduct of virtual meetings and the implementation of arrangements to enable the employee representative body to liaise effectively and confidentially with their members/colleagues. This will include ensuring that all representatives have access to the digital platforms being used by the organization.

Options for voluntary redundancy

In most jurisdictions, there is no legal duty to invite volunteers for redundancy, although in many, it is customary to do so. A global plan will need to take into account local laws and customs for seeking volunteers and, where appropriate, factor in additional time before initiating a formal plan for compulsory redundancies.

Alternative employment within the organization

When and to what extent does the employer have to look for alternative employment within the organization? If a legal obligation exists, is it limited to a search within the employee’s geographical workplace, the employer’s group, the domestic entity or global entity? Does this depend on the nature of the employee’s role? There may also be local formalities or requirements to be mindful of.

In France, for example, alternative employment must be considered before the dismissal is notified. The territorial scope of the search for alternative employment is the group but limited to the French national territory. In Germany, the obligation is limited to the employing legal entity but the decision on who should be offered alternative employment must be based on the social criteria used for selection and the offer must be made by way of an amendment notice (dismissal notice combined with re-engagement offer) rather than just asking the employee if they are interested in the role.

Employers in some jurisdictions are obliged to re-hire redundant employees for a period of time after their redundancy. For example in Poland, an employer is obliged to re-hire redundant employees at their request if, within 12 months after their employment ended, the employer employs workers in the same professional group. Similar preferential rehiring rights also exist in some of the Nordic countries.

Redundancy: severance considerations

There is also the financial aspect. Cutting costs also entails spending. What severance pay, if any, under statute, contract or collective agreements (pre-existing or to be negotiated at the time) is due to employees whose employment is terminated for redundancy or organizational reasons?

In addition to severance pay, there should also be a reserve for unplanned expenditure. For example, for litigation that might arise as a consequence of a procedurally unfair dismissal or simply the fact that in many jurisdictions it is cheap, easy and risk free for employees to bring a claim, so they might just do so to see if they can get a better exit deal.

Understanding the particular requirements in each jurisdiction will be pivotal in determining strategy. Some jurisdictions do not operate under statutory severance pay systems, meaning that severance costs in those areas will ultimately be a matter of negotiation, whether collective or individual. In Singapore, for example, an employee has no statutory right to redundancy/organization (retrenchment) benefits unless provided for under their contract or an applicable collective agreement. In the US, there is also no statutory right to severance. Local laws and norms on severance should be taken into account when calculating the cost savings of any global strategy.

How can employers operate a globally fair severance package strategy where statutory severance packages vary across jurisdictions?

In globally-connected companies, employees from different jurisdictions will exchange information which may lead to demands for a levelling up of redundancy benefits. A focused strategy which includes clear messaging should be determined from the outset on how to respond to such requests.

Employers should also consider the provision of support to employees to mitigate the impact of job loss in the current circumstances. For example, many companies may look to offer severance packages over and above the standard severance sum. This may often include outplacement assistance, although it is fair to say that this may be of limited immediate benefit in times of low recruitment and high unemployment. In some countries, such as Germany, the works council may try to negotiate deals that give employment guarantees for the remaining workforce for a certain period.

Separately, employers should consider how to retain morale among the staff who remain. This motivation should be at the core of a redundancy/ reorganization strategy. Staff will look to see how their colleagues have been treated and will also need reassurance about their roles and the future.

Reduction of workforce: garden leave

Employers may consider putting employees on garden leave during their notice period to ensure compliance with their contractual obligations as employees, although in some countries, such as Italy and France, this concept does not exist. In Singapore, employees may generally be placed on garden leave during notice even if the employment contract is silent on this point. This may be useful to ensure good faith during what will be a sensitive time for the organization.

The risks of workforce reduction

Not all employees will have the legal right to challenge the decision to terminate their employment. In the UK, for example, a qualifying service of two years is required to bring a claim for unfair dismissal. However, in many jurisdictions, employees have the right to litigate from the first day of employment. 

There may also be protected groups who have additional rights. For example, in the UK pregnant employees have greater protections against being made redundant in that they have a preferential right to be offered alternative employment. In Belgium, the group that enjoys special protection includes employees on time credit, prevention advisers and trade unions. In some countries, such as Italy and the Netherlands, employees on sick leave cannot be dismissed for a certain period, which raises the risk of employees going off sick from work once they know redundancies might be made. As we highlighted in our earlier briefing, in many jurisdictions selection of individuals for redundancy (or indeed any other step in the process) based on discriminatory criteria, even if inadvertently, may result in claims.

Where employees have the right to challenge the workforce reduction process and resulting terminations, the outcomes can be significant. In some jurisdictions, criminal liability can result, as well as injunctive relief to stop the process, damages awards, dismissals being deemed void and reinstatement to the individual’s previous job.

In the current environment of significant change and with employees having little to lose, litigation is likely to increase. Despite all attempts to ensure a legally robust process, such a risk is hard to avoid. However, by careful forward planning and by keeping staff at the heart of the planning and implementation process, employers can mitigate these risks. To this extent, meaningful consultation will be key.

How can employers ensure that employees who have been made redundant assist with any future litigation, where necessary?

The use of co-operation clauses in severance agreements may be an option in some jurisdictions; however such agreements will not be used in all cases, particularly where only the statutory severance amounts are being paid. Another option may be to gather documents and prepare witness statements in anticipation of litigation whilst employees remain employed; however the willingness of employees to cooperate in such exercise is likely to be limited where they are on notice of termination of employment.

Another issue to consider is whether employees have legal expenses insurance. This type of insurance is more usual in some jurisdictions than in others. This means that employees in some jurisdictions with insurance protection will be more prepared to bring proceedings in the hope of forcing the employer to increase settlement terms. 

Summary and practical tips for implementing a global workforce reduction

Getting employee communication right is the first critical step in implementing an effective workforce reduction exercise. The strategy should include a well-constructed communications plan, with associated supporting materials to help managers steer through the process. It is also advisable for employers to be flexible on timing and with regard to the practicalities of consultation where employees continue to work remotely or under altered conditions.

The following key points should be considered in implementing a multi-jurisdictional change project:

  • understand the legal and practical issues in each jurisdiction, including in relation to consultation requirements
  • devise a consolidated and coordinated global plan
  • follow a detailed project plan per country
  • ensure that a communications plan forms part of the detailed project plan and that managers are provided with support to implement the process
  • agree consultation protocols, including ensuring data privacy and business confidentiality is protected during remote consultation and the security of platforms on which information is disseminated
  • ensure that the consultation plan can be flexed where necessary to take account of issues that may arise and decide how much information should be provided to staff
  • as far as practicable, adopt a collaborative approach to consultation
  • consider the staff morale of those that remain and of managers who have had to conduct redundancy exercises
  • have a plan for the future business post restructure

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 raised by the COVID-19 pandemic.

 

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

 

For more information contact

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