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A Closer Look at The Employer's Charter

On 27 January 2011, at the same time as launching a consultation on tribunal reforms, the Government published a document called the Employer’s Charter, which can be found at www.businesslink.gov.gov.uk/employerscharter.

The Charter states that employers can do a list of things in relation to their employees, as long as they act fairly and reasonably. Examples of such things include asking an employee to take a pay cut, making an employee redundant if the business takes a downturn and asking an employee about their future career plans, including retirement.

The Prime Minister has stated that the Charter “sets out clearly the rights they (employers) have in the workplace” and that it “will provide clarity for employers on what steps they can take when handling workplace issues with staff”. However, whilst it is the case that the law allows employers more flexibility in their dealings with employees than many employers assume to be the case, the Charter is far from a clear statement of employers’ rights and, on the contrary, is dangerously misleading.

Let’s have a look at the examples from the Charter that I have referred to above.

Regarding pay cuts, I wonder whether it would be apparent to an employer reading the Charter that unilaterally reducing an employee’s pay will amount to a fundamental breach of contract entitling the employee to resign and claim constructive wrongful and unfair dismissal, or to remain in employment and make a claim for unlawful deduction from wages? Or that proposing to 20 or more employees that they should take a pay cut could trigger obligations in respect of collective consultation? Whilst an employer who was fully informed and who followed the correct procedures might be entitled to apply a pay cut, an employer who does not take advice could interpret the Charter as meaning they have carte blanche to vary employees’ wages as they see fit and expose themselves to considerable liabilities.

Regarding making an employee redundant, an employer may think that he is acting “fairly and reasonably” by making an employee redundant because he has been employed for the shortest amount of time or because he is older and does not have a young family to support like the other employees. However, that sort of action could leave the employer with a tribunal claim for unfair dismissal and/or age discrimination. Any redundancy selection must be on grounds that are not unlawfully discriminatory and, in the case of employees with unfair dismissal protection, must be on objectively reasonable grounds and subject to reasonable warning and consultation and a right to appeal. Before making 20 or more employees redundant, there will be a requirement, again, to consult collectively.  A competent professional adviser will be able to apply these requirements readily, but would most employers?  Would an employer even suspect that these requirements might apply on the face of the Charter?

My initial thought on reading the final example listed above, regarding asking employees about future career plans,  was of an employer asking a newlywed female employee what her future plans were regarding having children. I wonder how that would be received by her?  Some employees would take that, rightly or wrongly, as an indication that the employer might not favour them having children, and might point to the fact that that question was asked and allege sex discrimination in the event that thereafter they were, say, overlooked for promotion or denied a pay rise.

We would always encourage employers to not automatically assume that they cannot manage their workforces as effectively as they might wish because of a misplaced perception that employment laws are stacked in favour of employees and will prevent them taking reasonable business decisions – as long as they realise that there are some things that cannot be done lawfully, and there are many things that can be done lawfully only if things are gone about the right way.  Lanyon Bowdler's Employment Law department strongly recommend that employers take legal advice before carrying out any of the actions listed in the Charter, or any other similar actions, with a view to achieving what they require without incurring liabilities.