The Legal Pitfalls Surrounding Restructuring and Performance Management

13 June 2016

Commentary , Employment Law

To run an effective business, its important you have the right employees in the right roles, and you have a suitable workforce to meet your objectives.

From time to time this might mean dealing with legal processes surrounding the performance management of individuals or the restructuring of staff – both of which require attention to detail to avoid common pitfalls which can lead to costly disputes.

At Grimshaw & Co we often see employment disputes which arise because the employer hasn’t grasped the nettle, dealt with an issue early enough, or failed to follow the procedural steps required by law. So here are the common pitfalls and advice as to how to handle things properly.

Performance management pitfalls

1. Putting it off: Dealing with performance issues can be tough – especially in small companies with tight workforces. The difficulty in procrastinating with performance management is that if things reach a tipping point, you can only then start the process of documenting, setting targets and managing an employee.

2. Dealing with cases informally: If the odd shortcoming here or poor performance there is dealt with in a casual way with either an employer or manager simply telling the worker to “up their game”, you never actually confront the issue head on and the employee will not appreciate that there is a problem.

3. Failing to undertake performance reviews: Performance reviews are the perfect situation to set out the required standards, identify occasions when those standards were not achieved, and put in place frameworks by which the employee is able to reach those standards. It shows you have followed a fair process in dealing with an employee.

4. Failing to provide written warnings and keep records: Issuing written warnings and maintaining proper documentation on any issue relating to an employee means that if matters coming to a head you will have a record of what the business has done to address the issue. In the absence of recorded written warnings you may face having to pay someone out to leave rather than being entitled to dismiss them.

5. Failing to follow a fair process: Procedural matters in any disciplinary process are very important – for example the right for an employee to have a representative, the opportunity for the employee to have their say, taking into account their response, going back to other relevant witnesses or managers, and dealing with issues in good time.

6. Giving the impression that a certain outcome has already been decided: When an employer starts a performance management process, its important not to give the impression to the employee or their representative that the outcome is a foregone conclusion. You should indicate that you have an open mind in relation to the issues that have arisen and that you are following a genuine process.

Restructuring pitfalls:

1. Informal discussions: Dropping hints about restructuring over a period of time is not advisable – rather avoid leaks and wait until the company is ready to make a decision, then record your proposal put in writing so you have a consistent message, go out to consultation and give employees the chance to respond.

2. Failing to provide information on the restructure: Going through the consultation process doesn’t necessarily mean one meeting – it’s about disclosing information concerning the proposal, what positions will be left, what positions are going and – if you considering terminating the employment of some employees and not others – the criteria that is to be applied. This gives the employees an opportunity to provide meaningful feedback before a decision is made.

3. Not reacting to feedback: Ordinarily, once you have considered the feedback you are free to make a decision – but if you are changing the proposal you may need to call for more feedback on those changes before making a decision. Typically, in a small firm an employer will have a firm proposal and they know what they want to do – they’ll need a couple of meetings and then a decision, but with a large firm you are likely to get a lot of feedback from employees and their representatives and the process will take a lot longer.

4. Using a restructure to get rid of an employee for other reasons: It is common for employees to find that they cannot dismiss an employee because they have not followed a performance management process and have not issued formal warnings. The temptation is to engineer a redundancy instead. In these situations, it is normally obvious the restructure is not genuine and a personal grievance claim for unjustified dismissal typically follows.