Predictions of recession and a slew of announcements of downsizing by the construction, financial and property sectors explain why it is no surprise that employment lawyers are experiencing an unusually busy summer.

Comments from a spectrum of City and leading regional firms this week revealed that preparations are being made by a large number of organisations for the strategic dismissal of people. “There has been a big increase in the number of clients talking to us about this,” says Tracy Lacey-Smith, head of employment at SA Law. “In the case of construction companies, they’re actually involved in redundancy programmes while in other sectors they are gearing up for it.” Meanwhile, Jon Taylor, head of employment at EMW Law, says: “Redundancy is the No 1 employment law issue for employers now. Companies right across the board, not just in those sectors hardest hit by the credit crunch, like financial services, are looking for ways to trim the fat.”

The levels of redundancy are not as great as expected from the level of media coverage. “We’re getting a clear sense of a lot of restructuring going on,” Edward Cooper, head of the employment department at Russell Jones & Walker, says. “However, there are not as many job losses as might have been anticipated.”

What seems to be happening is that businesses are trying to fend off for as long as possible any final decisions about redundancy. Instead, the big hits are likely to come in the autumn or winter. Because of the complexity of employment law employers know that they need to plan much more carefully than they did, for example, in the early 1990s — hence the extensive advisory work taking place.

For starters, Martin Warren, of Eversheds, points to the significance of last year’s UK Coal Mining Ltd v National Union of Mineworkers and the British Association of Colliery Management case that established that it is not enough for employers to consult trade unions on how a closure and redundancy exercise would be handled but that the very rationale for the closure would need to be justified on economic grounds.

Added to this, the increasingly multinational nature of businesses means that cutbacks are likely to be implemented across a number of jurisdictions. “Our American clients have tended to treat Europe as one territory,” Warren says. “They are surprised at the differences between individual countries even though they are all governed by the same European directives.” As a result, legal advisers need to mastermind pan-European redundancy strategies. “There are huge differences from one jurisdiction to another,” Paul Griffin, of Norton Rose, says. “Our clients are turning to us to project manage these complex programmes for them.”

When it comes to the practicalities of dismissing staff, the methods deployed in the 1990s are also no longer appropriate. “In particular, ‘last in, first out’ is no longer applicable because it could be interpreted as being ageist and possibly sexist as well,” Julie Quinn, of Nabarro, says. Indeed the ageism issue is almost certainly going to be the joker in the pack for employers who want to dismiss people without any comeback. Recent employment tribunals have produced differing and contradictory interpretations of the law and everyone agrees that it is a grey area ripe for claims of discrimination.

Hence the growing popularity among employers for compromise agreements in which dismissed staff agree to enhanced pay-offs in return for signing away their rights to make any claims against the employer. “Being based in Hertfordshire commuter-land we have been approached by a number of individuals working in the City who have been offered compromise agreements by employers,” Lacey-Smith says. “The deal is that these agreements have to be checked out by an independent legal adviser so they come to us for advice.”

One important question is the point at which employers decide to switch from dismissing a number of individuals and opt instead for a wholesale redundancy programme. “The redundancy regime is cumbersome and very, very complex,” Quinn says. “Before embarking on it, ask yourself whether you are genuinely in a redundancy situation. It may be more straightforward to dismiss people on the ground of performance.”

The alternative view, advanced by Warren, is that to dismiss people on the ground of performance requires a paper trail of warnings and actions to enable individuals to improve their performance. In the absence of this it may be impossible to justify the dismissal which would then lead to an appearance at the employment tribunal — an added burden of time and possible fines when management ought to be focused on saving the business.

In order to get it right James Davies, of Lewis Silkin, counsels that in any dismissal programmes employers should “think long-term and remember the stayers”. The survival of the organisation depends on people being motivated and committed. “If it’s done badly then even those who do not lose their jobs may want to leave. This is particularly true of your best people. They are the ones who will find it easiest to get another job but you need to keep their loyalty during difficult times so as to rebuild for the future.”

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