What is it?
Restructuring – the process by which the structure of a business or organisation is changed, by removing, replacing or varying positions within that business or organisation.
Redundancy –Termination of an employee’s employment attributable to the fact that the position filled by the worker is superfluous to the needs of the employer.
Requirements for a restructuring
Genuine commercial reason
An employer must have a genuine commercial reason for undertaking a restructuring. The employer need not necessarily be in financial difficulties, as even a successful business may choose to make itself more efficient by abandoning or contracting out less profitable areas.
The business case for a redundancy will be open to scrutiny by the courts, if it is challenged by an aggrieved employee.
Consultation and good faith
An employer is required to consult with employees potentially affected by the proposed restructure. The employer should set out clearly what the restructuring proposal is, provide the potentially affected employees with access to information relevant to the restructuring and communicate to each employee exactly how they (personally) are affected by the proposal.
It is important not to cut corners in the consultation process. Generally speaking, the more detailed and precise the information available to the employees is, the better the quality of the decision making.
A meeting should then ideally be held with each affected employee, so that any questions they may have about the restructure can be answered, and so that they can then give feedback about the proposal.
It is important that the employer considers feedback with an open mind. The potentially affected employees may well have insight into whether the proposed changes are likely to achieve the desired outcomes. Bear in mind, however, that consultation does not mean that the employer must accommodate differences in opinion with the employee.
Once the consultation process is complete, the employer must decide whether the proposed restructure will proceed as originally envisaged, proceed in a varied form, or not proceed at all. It must communicate its decision clearly to any affected employees and follow any relevant processes set out in the employment agreement.
Termination and other options
Decisions will need to be made regarding employees whose positions are disestablished to the extent that their original positions no longer exist.
It is necessary to meet with and consult the affected employees as to options available to them. It may (for example) be possible to redeploy the employee within the business or to retrain them. Again, the employer must approach this task with an open mind, as there may be employment solutions which were not originally envisaged.
If more than one affected employee is to be considered for a new position, the criteria that will be used to select the successful candidate must be clearly communicated and fair.
If an employee is to be made redundant, this must take place in accordance with the relevant terms in their employment agreement (including any terms as to redundancy pay).
Redundancy not to be used to get rid of “problem employees”
If challenged, the employer’s business reasons for undergoing the restructure will come under scrutiny, as will the consultation and decision-making process. An employer cannot make an employee redundant just because they do not like them, or to shortcut to a performance management process. These are not genuine commercial reasons justifying a restructure.
What Bartlett Law can do for you
We are specialists in workplace law. We are able to assist and advise employers and employees at all stages through restructuring and redundancy procedures. We can:
- Guide employers through the process of preparing and disseminating a restructuring proposal;
- Guide employers and employees through the consultation and feedback process;
- Draft documents for the employer setting out a restructuring proposal, the decisions made as a consequence of consultation, and any termination letters;
- Appear for employers and employees in personal grievance proceedings and mediations if a restructuring is challenged.
Please contact us for more information.