How can HR professionals minimise the risk of litigation when it comes to complex business changes such as M&As, restructures and downsizing? Rebecca Mason presents six key tips.
HR is often in the unique position of being the ‘eyes and ears’ of the business and integral to significant business change. Where employees are impacted by the change, this can give rise to legal risk.
This article sets out six tips for HR professionals to consider when implementing a complex HR project, such as a restructure involving redundancies, which may lead to litigation.
Tip 1 – Document your process
Clarity of process is crucial. Just as critical is documenting it. Bear in mind that the process (and more to the point, any description of it), may be used in legal proceedings, as part of internal or external communications, or even find its way into the media. Setting out the process you will follow in a comprehensive ‘guidebook’ assists in demonstrating the care and rigour with your process.
For example, in the case of a large scale restructure, such a guidebook may include:
details of the work areas which will be effected by the restructure (and the business case behind this)
the timing of the restructure
the process for selecting employees for redundancy
details of the process for considering redeployment of effected employees, and
details of the internal checks which you have set up to ensure the restructure is fair (for example, an internal appeals process for effected employees).
The guidebook should be distributed to all HR professionals involved, as well as the managers involved, after seeking legal advice on its content and distribution.
Tip 2 - Get the right managers involved
Your decision-makers will be witnesses in the event of litigation. Having more than one decision-maker creates risk in and of itself. Who is best placed to give the evidence having regards to their involvement, seniority, time etc? Thought needs to be given to this. In some instances, managers will need training in the process. Proof of the training is sometimes helpful to defend claims.
Tip 3 - Discovery – consider documents from the start
A Court is likely to order that the parties ‘discover’ all documents, which are relevant to the issues in question. For example, if an employee who is selected for redundancy as part of a restructure brings an ‘adverse action’ claim under the Fair Work Act, the company may be required to produce the relevant employee’s personnel file, and any emails, text messages, letters or other documents which illustrate the relationship between that employee and the managers involved in selecting that employee for redundancy. If redundancies are due to declining economic conditions for the company, evidence of this may be necessary.
The prospect of discovery gives rise to two key sub-tips:
ensure that all potentially relevant documents are easily accessible so that if the Court orders discovery, you can comply with your obligations in the required timeframe
ensure that no documents are destroyed (albeit inadvertently) – it is against the law to destroy documents which are reasonably contemplated to be required for litigation purposes.
A record of discussions with, for example, employees and union representatives, is crucial and taken at the time of discussion or following shortly thereafter.
Remember that all documents brought into existence for the dominant purpose of providing legal advice will be subject to legal professional privilege, and not discoverable. However, this is provided that you do not act in a way that waives that legal professional privilege. For example, privilege is waived if you divulge the contents of legal advice beyond those who are relying on it for the purpose of advice.
Tip 4 – Communicate in advance with the business about the potential risks
No matter how excellent your process is, it is possible (if not likely) that some sort of legal action will follow a complex restructure. Ensure that the business is aware of the legal risks of implementing such a restructure. If there is the potential for a Court to order that the process be put ‘on hold’ this needs to be factored into the timeline/cost equation and the business needs to be aware of this. For instance, in workplaces where enterprise agreements operate, very often the dispute resolution clause will have the effect of putting a business change ‘on hold’ pending the resolution of the dispute.
Tip 5 – Take your time and use the resources you have available to you at the beginning to set up the process, and everything else will follow
Resist the temptation (and the pressure from the business) to get in there and get things done without the right preparation. A good, solid process takes time, and it is worth the investment. Assemble a team (with a project manager) and consider getting experts involved (be it legal, communications, industrial relations, government relations).
Tip 6 – Be conscious of other issues
Is the business in or about to be involved in enterprise bargaining? Are there employees on workers’ compensation who might be impacted? Are there health and safety considerations? In other words, be cognisant of whatever other issues might arise which may impact or be impacted by the change process.
About the author
Rebecca Mason is an employment law specialist with Freehills. She recently assisted a client with a major restructure