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Common issues
Redundancy, unfair dismissal, severance agreements
Q - Following a recent merger you have been told that you are redundant. You have been offered a significant redundancy payment. How has it been calculated? Are you entitled to more? Is the company dealing with you properly? What happens next?
A - Often, particularly with senior staff, companies choose not to follow proper redundancy procedures. Instead, they offer to 'enhance' the basic redundancy entitlement either to a group of employees, in a large scale redundancy/restructuring situation, or on an ad hoc basis for an individual.
The question of whether the offer is a good one can be involved, taking into account your benefits such as salary, bonus, car, insurance, share options, pension and tax issues along with your prospects of finding alternative work and the circumstances of the redundancy.
We can analyse the contractual position and any potential claims you might have against your employer and help you to negotiate with the company or negotiate directly on your behalf to maximise the value of the redundancy payment.
Notice, pay, share issues and termination benefits
Q - You have given notice to leave the company. Your bonus, which is due, has not been paid. Your manager says that payment is discretionary but your colleagues have all been paid. Is that right? What happens to your share options in these circumstances?
A - Bonus arrangements are often described as discretionary but once targets are agreed and an employee achieves those targets then the bonus will often become contractual and enforceable. The fact that colleagues have received bonus payments strengthens your position because when an employer exercises discretion in such circusmtances, it must do so fairly between employees.
However, there may be conditions to the bonus, such as a requirement that you are still in employment on the date the bonus becomes payable or that you not serving notice.
Share option rights are usually set out in specific agreements. Rights will vary but you may lose options once notice has been given particularly where options have not vested. You should take advice before you give notice.
Employment litigation, restrictive covenants, court and tribunal litigation
Q - You have been headhunted to work for a competitor. There are several pages in your service agreement concerned with restrictions on working for your competitors, dealing with customers and offering jobs to members of your old team.
What are you permitted to do and what may you not do? You have received a threatening letter from the company's solicitors. Where does this leave you? Does this mean you could end up in court?
A - Many service agreements contain these restrictive covenants. Courts will not enforce them unless they are reasonable and no wider than necessary to protect against unfair competition. Courts will scrutinise them very carefully because they have the effect of restricting individual rights to work freely within the labour market. However, it can be a mistake to treat them too lightly. The issues can be very complicated.
Court proceedings can also be risky and very expensive. For these reasons it is relatively rare for cases to get to court but, where they do, the stakes can be high, balancing the livelihood of an individual against the protection of a company's business. It is vital that you take legal advice as soon as you think that your activities might conflict with the restrictions.
It is worth taking advice on restrictive covenants at the time you enter into the service agreement. Unfortunately, many people do not but it is usually easier to negotatiate less restrictive terms at the start of the employment relationship than when you are thinking of leaving and working for a competitor.
Redundancy, discrimination and unfair dismissal
Q - You have been employed by the same company for over twenty years, working your way upwards to a senior position on the management team. You believe you have dedicated your 'best working years' to the company and are shocked to have just been called to a meeting by the newly appointed managing director and told that your role is at risk of redundancy. The company is looking to restructure and rebrand itself as part of the process. You are concerned that the new MD perceives you as 'old school' and that your age will count against you.You are concerned that if your employment is terminated in the next six months, you will miss out on a potentially valuable Long Term Incentive Plan (LTIP). Is there anything you can do to reduce your chances of selection for redundancy or enhance your position?
A - We would investigate to see if this was a genuine redundancy or just an excuse to get you out. Whilst redundancy is a potentially fair reason for terminating a person's employment, it might be possible to challenge the grounds for your selection and it can be helpful to scrutinise the selection process to identify any suggestion of procedural unfairness.
We can help you prepare for the consultation and selection process and help you to establish whether you have been subject to discrimination on the basis of age. In the event you are selected for redundancy, we could help you challenge the decision if it is unfair and negotiate a favourable severance package. The LTIP has not yet vested and depending on the terms of the scheme, it is possible that you will lose your entitlement to LTIP benefit when your employment terminates. This is a point which we would take into account in conducting negotiations.
Discrimination, pay and benefits
Q - You are a senior executive and the only female member of the management team. You have two young children and manage both a demanding work and home life. A less experienced male counterpart has been awarded a bonus under the terms of the company's performance related discretionary bonus scheme, on the strength of new work wins which he has brought into the business through extensive networking. Your family commitments mean that you have only very limited opportunities to attend marketing events, you feel very aggrieved as you have not received a bonus for a couple of years and feel that you have been overlooked, is there anything you can do?
A - We would need to look firstly at the terms on which you are engaged and the terms of the bonus scheme. It appears that the company has exercised its discretion to pay bonus to your colleague and it has a duty to exercise that discretion fairly in relation to your bonus. It may be that the basis on which performance is assessed is discriminatory. If this issue cannot be resolved informally it may be that you will need to commence a formal grievance process.
Service agreements and restrictive covenants
Q - You have been with the company for more than a year. When you joined the company you brought several large customers. You have just been given a service agreement to sign. However, it contains some clauses which would restrict you from taking customers with you if you left the company. Do you have to sign?
A - You should have received a service agreement at the outset of your employment. Despite this, there may be references to these restrictions in your offer letter or other documentation. You may be entitled to refuse to sign the agreement, but it may also be reasonable for the company to have some protection depending on the nature of the business. We could advise you on this and help you negotiate appropriate restrictions.
Contractual disputes and restrictive covenants
Q - You are a salaried partner in a professional practice. Twelve months ago you agreed to a temporary reduction in salary to alleviate the practice's cash flow pressures in a difficult economic market. At the point of agreeing to the reduction, you agreed verbally to review the situation at six monthly intervals, this has not taken place and you have now been told that a further decision will not take place until the anniversary of the pay reduction. Is your agreement binding and can you rely on this as grounds to argue that you should be released from your contract and the onerous restrictive covenants which it contains?
A - We need to establish exactly the basis and circumstances in which you agreed to the variation of your contractual terms, whether it has been documented in any way and how the relationship between you and the partnership has been affected by this decision. The enforceability or otherwise of the restrictive covenants may be open to challenge and this is likely to depend on how reasonable it is for the company to have a level of protection; what the industry 'norm' is in respect of restrictions and your level of seniority. We could help you explore this and establish your options: these may range between raising a formal
Disclaimer
This website contains general information and, although Averta Employment Lawyers LLP endeavours to ensure that the content is accurate and up-to-date, no representation or warranty, express or implied, is made as to its accuracy or completeness and therefore the information on this website should not be relied upon. Users should always seek appropriate legal advice from a suitably qualified lawyer before taking, or refraining from taking, any action. The contents of this website should not be construed as legal or other professional advice and Averta Employment Lawyers LLP disclaims liability for any loss, howsoever caused, arising directly or indirectly from reliance on the information on this website.
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