How to avoid 'status anxiety' when changing team structures

When dealing with staff changes, careful planning and good communication can reduce the risk of disputes, says Charles Wynn-Evans 

Changes to job roles, reporting lines and responsibilities can present challenges when managers think their status is being undermined – and that the change in question constitutes a demotion rendering the individual’s position untenable. 

Problems can arise if specific responsibilities are removed, such as the number of direct reports decreasing, the individual being ‘layered’‎ by the introduction of a new level of line manager, or the introduction of a new role shrinks the individual’s role beyond what is acceptable. Where the employer does not advertise a new role but promotes a peer directly into it, a manager who considers that he or she should have been considered for the role may also argue that the employer’s approach constitutes constructive dismissal and, if a protected characteristic can be argued to have influenced the employer’s decision, unlawful discrimination.

Whether or not a grievance is lodged challenging the decision, an affected individual may claim constructive and, if eligible, unfair dismissal on the basis that the change breaches the individual's contract. Employers also need to be alert to the risk of a manager arguing that an unfairly conducted grievance process undermines trust and confidence and constitutes constructive dismissal – or even constitutes victimisation where the executive’s original complaint was that his or her treatment was discriminatory. 

Arguing constructive dismissal may be less than straightforward if the individual's contract explicitly permits the employer to change their duties, reporting line and even job title. A constructive dismissal claim would then need to be based on the employer having exercised its contractual power to make changes so unreasonably that it constitutes a breach of the implied duty to maintain mutual trust and confidence. In any event, whether or not there is explicit flexibility in the executive’s employment contract, much will depend on the specific circumstances of the case in terms of the true nature and impact on the individual’s role of the change.

Often the argument in effect boils down to the employer defending its position by arguing that the individual’s job title, salary and other contractual terms remain unchanged, that the role and/or its reporting line has simply been adjusted in accordance with legitimate business needs and that the executive is still valued and needed – and the executive arguing that his or her substantive role, authority, status and credibility within the organisation have been irreparably impaired rendering the individual’s position untenable. 

An executive contemplating claiming constructive dismissal bears the burden of establishing constructive dismissal on the basis that the change in question constitutes a breach of contract. In deciding how to proceed in the face of an unwelcome change, the individual will need to assess this burden as well as the costs, delay and potential litigation and reputational risks associated with claiming constructive dismissal and commencing tribunal proceedings, as well as the potential for actual or potential mitigation of loss by way of new employment to reduce the award ultimately made even if a claim is successful. 

Employers need to be alive to these issues when planning to rejig their senior management teams not least given the financial exposure and disruption which can be caused by disputes at senior levels. Whether a claim will result will depend on the precise circumstances as disputes of this sort are highly fact sensitive. That said, careful planning and communication of management changes can go a long way towards reducing the risk of disputes, disruption and the unintended loss of valued staff.

Charles Wynn-Evans is a partner at Dechert LLP