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EAT condemns practice of ‘compromising staff out’

In King v Royal Bank of Canada the EAT upheld an appeal that an employment tribunal had not dealt with the question of remedies correctly after the employer conceded that a redundancy dismissal was automatically unfair, but in doing so condemned “compromising staff out” where the process adopted denies the employee any form of consultation, hearing or appeal.

The facts

Ms King was called to a meeting at short notice. She was not told the purpose in advance. She found two members of the human resources department there. In the course of the meeting she was told her role was redundant. She was put on garden leave. She was not given any letter of explanation. She was not afforded any right of appeal. She was given a draft compromise agreement and asked to go to solicitors, evidently in the expectation that a compromise agreement would be negotiated. Royal Bank of Canada (RBC) said the reason for adopting this practice was the potential risk of damage to the business from a disgruntled employee who remained in the office and continued to carry out day to day work. Ms King did not sign the compromise agreement. She brought an unfair dismissal claim.

The judgment

RBC admitted that the dismissal was automatically unfair because it had not followed the statutory dismissal and disciplinary procedure in force at the time. The EAT upheld Ms King’s appeal that the tribunal had failed to approach the question of remedies correctly by: (i) failing to consider re-engagement; and (ii) considering in its approach to compensation, only alternative vacancies at the time of the Ms King’s hasty dismissal and not over what should have been a meaningful consultation period. But the real significance of this case is that the Tribunal condemned the practice of ‘compromising staff out’ in such a way and the EAT agreed. The EAT said it was wholly unacceptable for any employer to adopt such a unfair practice as a matter of policy since it denied the employee any form of consultation, hearing or appeal. The possible risk to the business of a disgruntled employee does not require an employer to set aside basic principles of fairness and an employer can put measures in place which do not require dispensing with a fair procedure. Any organisation with a professional management team ought to ensure that the letter and spirit of the law is obeyed, not flouted. It is no more acceptable to break the law in this area than it would be in any other area of the respondent’s business.

The implications

The case clearly has implications for one of the 'exiting' routes which is sometimes chosen by employers where senior or sensitive positions are involved. A clear distinction can be drawn between: (i) the “square peg in a round hole” , or “we have to consider ending employment now”, discussion which is entered into as a process of negotiating a compensation package which allows an employee to leave with dignity; and (ii) a conversation such as “come in, your employment is at an end, the deal’s set out in a compromise agreement, take some legal advice before signing it, but you only have seven days to decide.” The EAT described the latter process as ‘brutal’ and employers following such a practice do so at their peril as the EAT’s comments will undoubtedly be quoted by employees in tribunal claims, and will also be used as a highly effective bargaining tool to drive the price of settlement up.

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Created on: 09-May-12 10:52

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