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Redundancy and settlement agreements for senior executives during COVID-19

COVID-19 is impacting businesses around the world, and the effect on the global economy is only just starting to be felt. Economists are warning of a substantial economic crash, and so businesses are having to make tough decisions in order to protect the viability of their company as best they can. Unfortunately, this will mean that many individuals will face possible redundancy, and this is at all levels of seniority, including senior executives. Here we consider what senior executives need to be aware of and what issues are likely to arise in the coming months.

Our expert employment lawyers have a wealth of knowledge and experience in this area and can give you practical advice on options available to you. We understand how difficult the thought of redundancy can be, but we will ensure that we negotiate on your behalf to increase the value of any severance package. We can advise you on whether the process being followed by your employer is both fair and legal and what options you have if there are any issues. Get in touch with our team today.

Coronavirus Job Retention Scheme

The Government introduced the Coronavirus Job Retention Scheme (CJRS) or 'furlough' to try and prevent mass redundancies during the peak of the lockdown earlier this year. Under the scheme, the Government paid 80% of the employee's wages while they were furloughed. Their employer could top up the other 20%, but they were not obliged to do so.

The scheme has been slowly reined in over the summer and is due to end on 31st October 2020. Therefore, businesses are now reviewing their workforces to consider the viability of maintaining the same numbers of employees in light of the changing world. Wages are often the most significant part of a business's outgoings, and in times of financial difficulties, this will be one of the first things an employer will review to make potential cutbacks.

Senior executives are often not the first to be considered in redundancy situations due to their experience and knowledge. However, they are also the most expensive employees within a business, so if outgoings need to be substantially reduced, the possibility of redundancy for these individuals becomes more likely. 

Severance packages and settlement agreements

When senior executives are made redundant, there is generally less consultation, and the likelihood of a severance package together with a settlement agreement are more commonplace.

Businesses need to be very careful about stating that an individual is going to be made redundant at the end of the furlough scheme since they are then making them redundant based on future events, which is not following the correct process.

The use of a settlement agreement is becoming increasingly popular. The employee will receive an enhanced severance payment, and the employer is protected from a future claim since the employee will waive their rights to do so. These agreements also remove the need for lengthy consultation periods, something that will appeal to many businesses during these difficult times.

Obtaining legal advice

It is a legal requirement for an employee that has been approached to consider a settlement agreement to obtain independent legal advice before making any decisions. This is to ensure that they are protected since these agreements will result in employees waiving their employment rights.

Our expert team of employment lawyers can advise senior executives that may be facing redundancy on their rights and discuss all options, including settlement agreements and severance packages to ensure the best outcome in their personal circumstances. Get in touch today.

Should you always agree to a settlement agreement?

Settlement agreements will not work in every situation, and our specialist employment lawyers can advise you on your particular circumstances. Various issues must be considered to make sure that you are getting the best outcome possible.

The settlement agreement does not have to commence immediately. It may be worth negotiating with your employer that you should remain furloughed until the end of the CJRS with the redundancy payment being given at the end of this time. The employer will have some limited financial obligations, but these will be minimal.  Therefore, this should be something an employer should consider that would extend the timeframe that you were receiving pay, allowing you more time to look for another job. If you have not been on the furlough scheme, then you should query with your employer why this has not been considered before redundancy.

Although these are extraordinary times, businesses will still be making decisions based on other reasons than just COVID-19. Perhaps you feel that the reason for redundancy is not in relation to the economic health of the business but for another reason. In that case, this can still be challenged (for example, if you had recently raised a grievance with your employer, or believe you are being unfairly dismissed or subjected to discrimination). If the redundancy is actually for another reason, then this is something that should be part of the negotiation and factored into any settlement package.

We are extremely skilled at negotiating an increase on the settlement and are able to do so on a no win no fee basis, whereby only the increase on the existing offer would be subject to a success fee.

Protecting employee interests

All issues covered by the settlement agreement must be reviewed to ensure that they best protect your interests. In relation to the notice period, there are generally several options such as working your notice, payment in lieu or gardening leave. Which is best in your situation will depend on how quickly you feel you will find another job, whether you wish to have a clean break and lump sum or continued employment and benefits. These can be points of negotiation depending on your circumstances.

Restrictive covenants

With senior executives, there are often clauses regarding issues of competition and restrictive covenants in place. In these situations, you will need to negotiate with your current employer to see if these can be reduced or removed in the present circumstances.

Bonuses and owning equity in the business

If you are due a bonus under normal conditions, it is also necessary to discuss if this will be lost if you accept a severance package.  We have a particular interest and history of success in claiming bonus payments, particularly where the exercise of discretion has not been made fairly.

If you have equity or shares in the business in the business, this also needs to be discussed and included in the package. Careful consideration is required in relation to the impact on your shares once your employment is terminated.

Alternatives to redundancy

If there is a risk of redundancy, then it may be worth discussing with your employer if there are any other options that could be considered before this route is taken. Some examples of other options are:

  • Taking unpaid leave or a sabbatical
  • Being considered for other roles in the business
  • Being laid off for a limited period without pay
  • A pay cut
  • A reduction in days or hours worked
  • Moving onto a zero-hour contract
  • Being moved to a different area of the business

An employer must consider alternatives to redundancy and if you are prepared to follow any of these routes, then it is worth discussing these options.

Contact our Redundancy Lawyers in London

The current economic climate is unprecedented and is affecting businesses worldwide. If you are worried about the risk of redundancy or your company has raised the possibility of a settlement agreement, then you must take legal advice. Contact us to find out how we can assist by completing our online enquiry form or calling 020 7167 4800 today.

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Considerations for senior executives during COVID-

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