Earlier this month, the Chief Executive of a US mortgage company made the news for all the wrong reasons. Having arranged a Zoom call with 900 of his team, without any warning he announced that 9% of the company headcount had to go as part of cost cutting measures and if they had been asked on to the call they were “part of the unlucky group being laid off. Your employment here is terminated, effective immediately”. Within a short space of time a recording of the ill-fated meeting went viral on social media and the inept CEO’s attempt at managing a most difficult situation was news around the world, damaging his reputation and the Company’s brand, to say nothing of the morale of all his staff.
Difficult decisions like this are the responsibility (and sometimes the curse) of senior management. But they have to be taken at times and how they are communicated and implemented can make the difference between staff being frustrated, disappointed but ultimately understanding on one hand, or shocked and profoundly angry on the other. One employee is reported to have said “they dumped us like trash” during the Zoom call reputed to have lasted only 3 minutes. For lawyers trying to support clients, getting it so badly wrong can also risk otherwise avoidable claims, significant costs and needlessly wasted management time.
The experience of the 900 staff at Better.com is less likely to have occurred here in the UK where, as with other European jurisdictions, redundancies on that scale must be managed according to legislation with strict requirements around prior consultation, election of staff representatives and clarity around the method of selection for those who may have to lose their jobs when final decisions are taken. A failure to comply can result in claims and punitive awards in the Employment Tribunal amounting to up to 12 week’s pay per affected employee. Multiply that by a group of 900 and you begin to see why trouble is best avoided, especially if your business is struggling enough to have to lay staff off in the first place. But employers here also get it wrong, in their own way.
Employment or labor law in the US has a much lighter touch. Even so, a process as poorly judged and mismanaged as that infamous Zoom call can still be extremely damaging in other ways, wherever you do business. A Company with a poor reputation will have a harder time recruiting. Other businesses may be less keen to engage with them if they are known to treat staff badly. Customers, which are the lifeblood of any business, may well be turned off too. The CEO has since attempted to apologise to his staff for his “lack of respect and appreciation” but the damage has been done.
If your business faces a difficult decision affecting employees, then get in touch with one of the team here at Thorntons on 03330 430350. We can help guide you through in a way which is both compliant and sensitive. You may also be interested in joining us for our free webinar in February 2022 on Managing Change in the Workplace when we will touch on amongst other things, the best way to handle redundancies. To receive details of this, and other upcoming webinars you can sign up here.