Employment disputes - the legal and reputational risks

As the likelihood of a coming downturn continues to increase, HR professionals should expect to see rising numbers of employment claims stemming from the critical decisions being made around furloughing, redundancies, reassignment, promotions, remuneration and more. 

Employers need to think carefully about how they manage the heightened levels of legal and reputational risk associated with this predicted rise in complex employment claims

The blending of legal and reputational risk

Periods of national difficulty add an important new dimension to how organisations manage employment legal risk. The UK’s experience of Covid-19 is no different. In many respects, a sense of solidarity between people and entities now pervades the economy, bringing about a shift in perception around the relationship between employer and employee. Employers are now expected to carry an even greater moral and practical responsibility towards their employees than ever before. 

In this new reality, employers must tread carefully. On the one hand, the legal rights of employers remain intact and every leadership team has the responsibility to make tough decisions in the long-term interest of its organisation. At the same time, any organisation now seen to be failing in its duty towards its employees, or acting out of step with prevailing public sentiment around employers’ broader societal responsibilities, should expect significant scrutiny.

Media appetite

Media appetite is high for any evidence of organisations being seen to ‘do wrong’ by their staff. Several high profile brands, not least in the retail and hospitality sector, have incurred substantial reputational damage in recent weeks resulting from questionable employment-related decisions that contravened consumers’ sense of right and wrong.

This is particularly true in the cases of those unfortunate to have ‘fallen through the cracks’ between employment contracts. Some individuals who had unwittingly left contracted employment have found themselves ineligible for furlough on account of having left their previous employer and yet not having registered on their new employer’s payroll by 19 March. Some employers have also been criticised for not re-employing employees who have left but are eligible to be furloughed.

In other cases, those employers who have refused to furlough zero hours workers are liable to incur considerable reputational harm. Many have communicated their anger via social media, bringing unwanted public attention to their employers. Journalists are actively using social media to search for case studies of individuals who have been mistreated by employers.

The risks are not only immediate. Looking longer term, we may anticipate HMRC introducing a ‘naming and shaming’ scheme when auditing furlough pay claims. Though not confirmed, such a scheme would be in-keeping with government treatment of the minimum wage programme and would present a significant reputational risk to any organisation errant in their use of furlough support.

Mitigating risk

Leadership teams need to think calmly and contextually when taking tough decisions involving key areas of employment law. Internally, there needs to be strong coordination between the HR, legal, risk and communication functions to ensure that risks – whether employment-related or not – are foreseen, mitigated and managed. 

When difficult announcements must be made, communications and legal professionals must work hand in hand to ensure such news is explained with due sensitivity, both internally and externally. 

Though difficult decisions may be necessary, organisations cannot escape the reputational fallout of any decision made. Now more than ever, optics matter. Wherever possible, senior leaders must consider what non-legal obligations their organisation has – and is perceived to have – towards its employees and other core stakeholders. The current crisis will, eventually, pass. How businesses responded will be remembered and recorded forever. 

By Ed Cotton, employment partner at TLT, and Peter Barrett, director and head of crisis and special situations at communications firm Infinite Global

This article was first published by People Management 

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at May 2020. Specific advice should be sought for specific cases. For more information see our terms & conditions.