Transparency vital to avoid redundancy-related legal action
28 November 2008 10:37am
Concealing a company's shaky financial position from employees during the economic downturn could be grounds for an unfair dismissal case should redundancies ensue, according to a workplace lawyer.
Long-term employees who feel they have been kept in the dark account for many unfair dismissal claims, Shana Schreier-Joffe of Harmers Workplace Lawyers told a Sydney seminar yesterday.
And they can feel particularly aggrieved if they have recently turned down other career opportunities to remain loyal to the business.
While acknowledging that it is difficult for employers to determine how much information they should share with employees, Schreier-Joffe says that misleading them, or omitting information about the organisation's financial position, can constitute a breach of the Trade Practices Act 1974.
In addition, she says, an opaque approach to lay-offs and the creation of an "uncertain" workplace environment can be damaging to company morale.
"You're not only affecting the person you make redundant but everyone who remains in your employment," she says.
An open and holistic change management strategy, therefore, is critical in protecting an organisation from an internal morale meltdown and a litigious morass.
"If you do everything up front, you probably won't find yourself at the end of a lawyer's letter," she says. "It will certainly help business in the long term."
There will eventually be an economic upturn, she says, and if a business has maintained its "moral high ground" during the redundancy process it will find itself in an advantageous position when it is time to recruit again.
According to Schreier-Joffe, the elements of an effective change management strategy include:
a proposed change action plan - including a commitment to flexibility and a willingness to explore options, such as part-time work, before making an employee redundant;
a communications strategy - "One of the fundamental pillars of an effective change management plan is communication," Schreier-Joffe says. "Most people respond positively if they're kept informed";
a commercial contingency plan - such as a process for informing and directing suppliers or customers whose contact has been made redundant;
an industrial action response plan - including the development of a relationship with relevant unions and an understanding of how they are likely to respond to redundancies; and
a legal risk management strategy - including an audit of all legal requirements in an effort to reduce the risk of subsequent employee action.
In managing the redundancy process, Schreier-Joffe says, employers should:
consider the extent of their consultation obligations and the consequences of failing to consult, whether legal or otherwise.
There are circumstances, she says, in which it might not be feasible to consult with affected employees. "Best practice", therefore, is a policy of being as transparent as possible without damaging the business;
identify objective selection criteria, while remembering that the purpose of a redundancy is to remove a function or role, not an individual employee;
establish a valid reason, distinct from performance and misconduct;
explore all alternatives before proceeding with the termination; and
seek input on ways to minimise the impact on the employee and workplace should the redundancy go ahead.
Schreier-Joffe also warns that:
payment in lieu of notice can be considered unlawful if the option isn't stipulated in the employment contract;
employers are legally required to contact Centrelink if they are making more than 15 employees redundant before they make the redundancies; and
employees should be thoroughly familiar with the Fair Work Australia Bill before its probable implementation in January 2010.
The legislation, which will supersede Work Choices, will include compulsory severance payments for all employees with at least one year's service in any organisation with more than 15 workers.
