MANAGING EMPLOYEE EXITS FRIDAY 4 NOVEMBER 2011

1. MANAGING EMPLOYEE EXITS FRIDAY 4 NOVEMBER 2011 Paul McMahon, Partner Brodies LLP Telephone: 0141 245 6281 Mobile: 07817922588  E-mail: paul.mcmahon@brodies.com

2. What will be covered today? • The legal framework - contractual + statutory rights • The public sector context - more scrutiny, additional layers of • procedural protections and obligations, the public purse • General options open to the public sector employer in exiting • employees- • act fast, litigate later • agreed exit/package • exit for “ potentially fair” reason under compliant procedure • An eye to the future – changes afoot

3. The legal framework for employee exits – contractual + statutory rights • Contractual rights - breach of contract, wrongful dismissal • express, incorporated and implied terms • right to notice • right to invoke contractual procedures (Mezey South West London & St George’s Mental Health NHS Trust 2010) • Statutory rights - unfair dismissal • “…English employees enjoy statutory protections in addition to their contractual rights on termination. In essence the “at will” status does not translate well across the Atlantic.”

4. Q: Act fast, litigate later? A: Sharon Shoesmith Case • The public sector context – • public interest (outcry) • ministerial intervention (direction) • judicial review on top of unfair dismissal proceedings • Accountability is not synonymous with heads must roll- • the accountable person is obliged to explain the state of affairs • the corollary is that there must be a proper opportunity to do that

5. Agreed exit/package – compromising situations • Negotiating the deal - timing and risk appetite • Without prejudice conversations - are we really off the • record? • the rule • the label “without prejudice” • limitations- • interpreting a settlement agreement • discrimination claims?

6. Agreed exit/package – compromising situations • Without prejudice conversations and practical • considerations- • ensure there is a pre-existing dispute • ensure both parties understand the aim of the discussion • use the label “without prejudice” • there are no guarantees so no potentially incriminating admissions!

7. Agreed exit/package – compromising situations • The ultra vires doctrine • “irrationally generous” compromise agreements (Gibb v Maidstone & • Turnbridge Wells NHS Trust 2010) • Practical tips to comply with the ultra vires doctrine • act within statutory powers • fully document decisions • take account of all relevant considerations • ensure that decisions are rational and evidence based

8. Agreed exit/package – compromising situations • The best value duty • Voluntary redundancy and early retirement schemes • Audit Scotland’s Note For Guidance 2011(Severance Schemes)- • statutory powers • key risk areas – • policies • decision making • affordability and value for money • senior management

9. Exit for “ fair” reason under compliant procedure- easier said than done! • And then there were five – abolition of the default retirement age and • the five fair reasons for dismissal • Capability related exits – performance management of older workers. • Conduct related exits – additional burdens on the public sector • employer? • Redundancy related exits – redeployment and temporary roles • Exits for “some other substantial reason” – changing terms and • conditions.

10. And then there were five – abolition of the default retirement age and the five fair reasons for dismissal • The five potentially fair reasons: • conduct • capability or qualifications • redundancy • illegality • some other substantial reason (SOSR) • The short lived sixth reason: • retirement

11. Abolition of the default retirement age and retirement exits Retirement – The position before April 2011 • employers could have a normal retirement age (NRA) or if not, the DRA of 65 • compulsorily retirement of an employee at NRA or DRA not unfair dismissal and not age discrimination if statutory retirement procedure followed • Since 1 October 2011 employers cannot rely on the DRA and statutory • retirement procedure when dismissing employees to avoid claims of • age discrimination and unfair dismissal

12. Abolition of the default retirement age and retirement exits • Options open to employers in exiting older employees:- • continue with a compulsory retirement age (seek to justify under unfair dismissal law and age discrimination law) • abandon compulsory retirement age (performance management) • Voluntary retirement – many employees still likely to retire • voluntarily. Treat as resignation

13. Abolition of the default retirement age and retirement exits • Continuing with compulsory retirement age: unfair • dismissal considerations- • for any dismissal to be fair one of the potentially fair reasons for dismissal must apply (SOSR) • the employer must act reasonably in dismissing the employee for that reason • a fair procedure must have been followed

14. Abolition of the default retirement age and retirement exits • Continuing with compulsory retirement age: age • discrimination considerations- • Retirement will need to be objectively justified as a proportionate means of achieving a legitimate aim to avoid successful age discrimination claims. • “The test of objective justification is not an easy one to pass”- ACAS Guidance-Working Without the Default Retirement Age

15. Capability related exits – performance management of older workers Under-performance should be managed via the same route as the rest of the workforce i.e. the capability/performance management procedure • Factors to be considered when assessing reasonableness of a • performance management procedure include- • proper appraisal of the employee and problems identified • steps taken to minimise the risk of poor performance • provision of training and supervision • opportunity given to improve

16. Capability related exits – performance management of older workers The ACAS Guidance encourages a culture of voluntary "workplace • discussions“ Some practical considerations:- • built into the appraisal system and conducted at least annually • discuss employees’ future aspirations and plans – avoid use of language linked with age • ask open questions about the employee’s future plans for the short, medium and long term • Government proposal to allow “protected conversations”

17. Conduct related exits – additional obligations on the public sector employer? • Cross-examining witnesses at disciplinary hearings (Bonhoeffer • v GMC 2011) • Legal representation at disciplinary hearings (G v The Governors • of School X 2011) • Insisting on a disciplinary hearing before an external panel (Puri • v Bradford Teaching Hospitals NHS Foundation Trust 2011)

18. Redundancy related exits – redeployment and temporary roles • Fixed-term employees- • right not to be treated less favourably • collective consultation requirements apply • A word on agency workers • Redeployment and suitability of temporary nature of role- • (Chard v Hartlepool Borough Council 1991) • (Dutton v Hawker Siddeley Aviation Ltd 1978)

19. Exits for “some other substantial reason” – changing terms and conditions • Options open to the employer wishing to make contractual • changes- • seek consent • unilaterally impose • terminate employment and offer re-engagement on new terms • Sound business reason required to justify termination…… • but does not need to be vital to survival of business

20. An eye to the future – changes afoot • Increased unfair dismissal qualifying period (1 to 2 years) • from April 2012 • Introduction of fees to pursue Employment Tribunal claims • from April 2013 • Government proposal to allow “protected conversations” • Leaked report recommends abolition of unfair dismissal