Carrying out a restructure
If you need to carry out a restructure of your business as a result of the impact of the COVID-19 pandemic, you are still required to comply with employment law requirements. Despite the current circumstances, you still need to:
- have genuine business reasons for the restructure; and
- follow a fair process.
1. Determine whether a restructure or redundancies are necessary.
Many businesses suffered an immediate loss of revenue, even before the Level 4 Lockdown was announced. However, before exploring redundancies, you should first consider other measures to compensate your loss of revenue e.g. cutting all non-essential suppliers and costs, using the Wage Subsidy scheme, approaching your landlord for rental relief and engaging with your bank. . For many businesses however, the financial impact of COVID-19 will take longer than 12 weeks to recover from and redundancies are inevitable.
We recommend you seek legal and accounting advice before committing to a restructure of your business, to ensure you have explored all avenues and that a restructure is the correct course of action. In addition, you need to document your business case to record:
- what is the objective of the restructuring;
- how the change will help you achieve that and why you can only achieve that by restructuring;
- how you will manage any business risks or issues arising from the restructuring;
- what are the costs of the restructuring.
2. Compile a Restructure Proposal Document.
If redundancies are being considered, you should put together a Restructure Proposal Document (“RPD”). For the process to be fair, employees must have access to all relevant information to enable them to make informed comments upon the proposal and this information should be contained in the RPD.
The RPD should include or outline the following:
- what you are proposing to do (eg. jobs being dis-established, wages reduced or terms and conditions changed);
- why it is necessary to restructure (eg. 20% cost needs to be taken out of the business)
- what you propose the new structure to be (eg. organisational chart with key functions; job descriptions recorded) including all options being considered.
- where relevant, use of the Wage Subsidy, wage reductions, job-sharing or redundancies.
- include a timeline of the process, with dates for when employees are to provide feedback, how long you will consider that feedback and when a final decision will be made;
- due to the current circumstances, feedback will need to be given in writing or by telephone and the final decision will be conveyed in the same way; and
- also state that employees are entitled to seek legal advice or have access to a support person, although meetings will need to be conducted via telephone.
3. Consult with employees.
You will need to notify all affected employees of the proposal and provide them with copies of the RPD. In the current circumstances, notifying employees by email will be the most practical course, but make sure all employees are aware of the proposal and follow up with telephone calls if necessary. If you have followed up by telephone calls, record in writing that you have done so, even if it is just an email to your employee stating that you have spoken to them about the proposal.
Allow employees a reasonable opportunity to consider the proposal, to ask questions and to seek legal advice. A normal consultation might take two weeks, but in the current circumstances a reasonable consultation period might be three to five days.
4. Consider feedback.
Keep an open mind when seeking employee feedback as employees may make suggestions that impact the outcome. Respond individually to any feedback which is specific to an employee’s individual situation. We recommend that you prepare a feedback summary document to record the feedback, any responses you gave and to show you genuinely considered it. If you make changes to the RPD based on any feedback, you should send an updated copy of the RPD and confirm with the employee when you will make a decision.
5. Make a decision and notify employees.
Take time to consider your decision, ensure that you comply with the process timeline and notify the employees of the outcome on the decision date.
If any employees are to be made redundant, they should be informed by telephone and this should be followed up with a notice of termination in writing. On termination, the employees should be paid out any notice period and redundancy entitlements contained in their employment agreement. The notice should make clear the date that their employment will come to an end and when they will receive their final pay, which will include any outstanding holiday pay.
Lastly, be aware of your obligations under the wage subsidy. For more details regarding the subsidy please read our previous article here.
This is an outline of a fair process, but every situation is unique and employers should seek legal advice to ensure that they are following the correct procedure and are making redundancies as a last resort.
The above information is of a general nature only. The information contained in this document does in no way constitute legal advice and all readers should contact a law firm for advice relating to your specific circumstances.
About Anna Fox
Anna is a senior partner at SRB, and former head of our Commercial Team. She also held the firm's Managing Partner position from 2017 until mid-2021. She assists clients with major commercial transactions, including structuring business entities and advising on large scale property transactions. Anna also advises on securities law compliance.
About Nick Strettell
Nick is the head of the Saunders Robinson Brown Commercial Team. He specialises in company law, commercial property matters and business sale and purchases.
About Vanessa Baakman
Vanessa is a Senior Associate in our Litigation Team and specialises in employment law, acting for both employers and employees.