The legal consequences of getting employee relations wrong

From TUPE transfers to managing poor performance, Lucy Gordon explains why it’s vital for employers to foster good relationships with their workers

It is hard to underestimate the potential consequences that can arise for businesses that fail to promote good employee relations. From having a disengaged workforce who aren’t performing to their optimal level to the instability, bad PR and increased recruitment costs incurred when haemorrhaging staff, the practical outcomes are well-known. However, there can be significantly more sinister effects from a legal perspective, which aren’t always recognised. 

Poor employee engagement can foster environments where staff are cynical and mistrusting of their employer. This can lead to situations where employees inevitably doubt their employer’s every move, and genuine concerns about performance – which could have been handled in a sensitive and encouraging fashion.

Instead, this leads to employees believing there have been targeted campaigns to ‘oust’ them from their roles, resulting in claims for constructive dismissal.

Had the employer taken a more proactive, supportive approach to managing poor performance, the employee may have been able to turn the situation around or, even if they would still have parted ways, potentially done so more amicably, without the additional cost and stress of legal proceedings.

In a similar vein, working environments where staff don’t feel listened to frequently report higher absence levels. For example, those who don’t feel valued may be more likely to take time off for every niggle that arises, which can in turn prompt employers to start absence management processes.

Handled badly, these developments can quickly become adversarial, leading to claims for unfair dismissal or disability discrimination, or employers having to put their hands in their pockets for expensive settlements.

Many of these outcomes could perhaps be avoided by having better employee engagement from the outset, so that staff feel respected and valued in the workplace and only take time off when it is absolutely necessary. 

However, perhaps the most frightening potential issue resulting from a failure to engage well with staff is around larger-scale projects such as redundancies and business transfers. An organisation that does not regularly engage with employees about company developments and future plans could well overlook the legal requirements to consult with elected employee representatives about such proposals.

These legal requirements oblige companies to consult with staff representatives about proposed business transfers under TUPE, or where they are proposing to make 20 or more employees redundant at one establishment within a 90-day period. The latter obligation can also be triggered when changing employees’ terms and conditions of employment, depending on the circumstances.

Failing to comply with these rules about consultation can land businesses with hefty penalties – up to 13 weeks’ gross pay per employee in the case of TUPE transfers, and up to 90 days’ pay per employee in the case of redundancies/changes to terms and conditions.

These figures can quickly spiral into millions depending on the size of the business. Organisations that regularly engage with staff through employee forums and staff consultative committees are less likely to miss these obligations and are far better prepared when these types of situations arise – often being able to achieve efficiencies above those that are less well-engaged.

Lucy Gordon is a senior employment lawyer at ESP Law