End of hire and fire culture in the City of London?

| November 20, 2012
City of London Skyscrapers

City of London Picture: http://flic.kr/p/duEAMP

Most businesses, especially small businesses, struggle with difficult employment law situations.

It is a far from uncommon situation for there to be a breakdown in confidence or trust between employer and employee, perhaps a perceived lack of performance, an attitude issue or the employee does not feel motivated or supported. These are just a few examples of what can happen short of a gross misconduct issue.

In many cases, the employer is concerned about an expensive and time consuming Tribunal case and so there is almost a stand off, where both employer and employee know realistically that they will part, but the employee perhaps wants to sit it out while looking for another job, and the employer starts a long process of trying to “manage the employee out”.

These situations often reach an intolerable stage, where the employer still does not have safe grounds or has not gone through all it’s procedural requirements and the employee also wants out. This is where use of compromise agreements is quite common.

The situation, in our experience, for many city of London financial workers has historically been quite different. When the City was buoyant, very well paid financial jobs were quite easy to come by. Employers and employees knew this. The banks and other institutions often didn’t even bother going through the motions of starting disciplinary process or considering compliance with employment law.

Instead, what would commonly happen is that the employee would be approached, without warning, told to clear his or her desk and literally escorted off the premises there and then.

So, how and why would the banks and financial institutions behave like this ?

The answer is that they would pay the employee off with a compromise agreement, typically with 6-12 months salary. The employee would invariably have strong grounds fro making an unfair dismissal claim, but this would be counter productive to the employee’s interests. This is because unfair dismissal is based on loss not compensation.

In order for it to be worthwhile for an employee to make a claim in the Tribunal, he or she would have to be out of work, or suffer an ongoing drop in pay of more than the sum offered in a  compromise agreement. The employers knew this full well, so simply ignored employment law and dealt in cold hard cash.

Whether this will be possible in many cases in the future is now a moot issue and one which will need to be re-evaluated in many cases. The City of London has changed over the past 3 years and is continuing to change significantly. Jobs are being lost and will continue to be lost and many commentators are suggesting those jobs will not return for some years if at all. City workers are having to rethink their careers and in many cases, they may well either take a significant period to secure alternative employment or may take on other jobs which will be significantly less well paid on an ongoing basis.

In these circumstances it may well be the case that the employee could have a claim, although probably a High Court and not Employment Tribunal claim (as there is a financial cap on claims that can be made for unfair dismissal in the Employment tribunal) which is more than 6 months or a years money offered in a compromise agreement. From the employers point of view, offering more than 6 months or a year’s money in a compromise agreement does not really make much sense either, since it is likely to be better for the employer to comply with employment law, especially procedure, call the employee’s bluff as to whether he or she will start a tribunal claim, and re-evaluate the case as it develops, based on the legal position and the employee’s ongoing loss. It should also be remembered that the duty is on the employee to mitigate his or her loss and to be actively seeking work, even if unfairly dismissed.

Gannons solicitors are experts in employment law, advising both senior employees and employers on all aspects of employment and contractual rights.


End of hire and fire culture in the City of London?


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