You’re put ‘at risk’ of redundancy…so, what happens next?

You’re put ‘at risk’ of redundancy…so, what happens next?

In the wake of announcements of further redundancies, the dreaded words ‘at risk’ are ringing in the corridors at Barclays, Credit Suisse and Nomura amongst other City financial services firms with implications for individuals on pay, the continuation of benefits, fixed allowances and bonuses.

'At risk' - two words that City executives don't want to hear in the weeks prior to their annual bonus being paid. Technically, being put at risk of redundancy means you have been identified as one of several people who 'may' be made redundant after a period of consultation.

All too often, however, what it really means is “we've decided you're going to be leaving the firm but our lawyers have told us that we can't tell you that just yet”.

It is typical in the City - particularly in financial services - for the bonus year to be the calendar year but for bonuses to be paid out a few months into the following year (usually around March). If you work for an investment bank or brokerage firm, your contract will almost certainly say that unless you are still employed in March, then you get no bonus at all.

It is for this reason that the few months between Christmas and Easter are dubbed by many employment lawyers as redundancy silly season. We see swathes of cuts made between January and March as the big city firms see an opportunity to avoid paying bonuses and thereby reduce their overheads. And, let’s be honest, to use this same exercise as a general sweep up which gets rid of their poor performers and any troublesome members of staff.

Whilst bankers and brokers are far from topping the charts in terms of public opinion, it must be pretty galling (substitute more explicit adjective depending on the amount of said bonus) to work for the full bonus year, do all that is asked of you in that time and therefore expect and plan to receive a decent bonus - only to be canned at the last moment in a so-called 'cost-cutting' exercise.

So prolific have these Q1 cullings become, that many City executives have started to accept them as par for the course. That said, the enhanced redundancy package offered by most of the big banks is the added sweetener which encourages many to move on quietly and swiftly with good leaver status thereby preserving valuable shares, options or equity. Indeed, if you are relatively confident that you will find a new role in a matter of months then a redundancy situation will often result in a financial windfall and a nice holiday.

But what if you are not offered an attractive exit package? What can you do if you find yourself in this situation?

  • If you've been employed for over 2 years, you may be able to argue that you have been unfairly dismissed. You would need to show that it's not a genuine redundancy i.e. it's a sham intended to cover up the company's real reason for wanting you out. This is much harder to do if the entire desk or business area you work in is being closed, as opposed to just your role suddenly being surplus to requirements. If it's just your role that’s been targeted, you'll need to try and identify what's really going on, why was there a black mark against your name? I’ll come back to this.
  • If it's not a sham, you will need to show that the company has failed to consult with you, selected you unfairly or failed to explore the possibility of alternative employment. In the current climate, spurred on by Mr Cameron’s determination to allow businesses to hire and fire at will, this can be an uphill battle. But you should engage with the consultation process, ask all of the questions that you have and raise a grievance if your concerns are not addressed. Unfortunately unfair dismissal compensation is capped at around £80k so this won't touch the sides where six figure bonuses are involved.
  • Coming back to that black mark, you should consider whether you are being targeted for a particular reason. Have you been selected for redundancy ahead of others because of your race, gender, age, religious beliefs, marital status, disability or sexual orientation? Alternatively are you being pushed out because you have you complained about malpractice or a financial irregularity of some kind? Many of those that spoke up about LIBOR and FX rigging are undoubtedly counting their redundancy pennies as you read this. Discrimination and whistleblowing compensation is uncapped so, if you can prove that either of these led to your exit, you can claim for any earnings that you lost as a result, including your bonus.
  • Finally you could argue that the bank has sacked you specifically so that it can avoid paying your bonus. This kind of claim is most likely to get off the ground if your dismissal takes effect very close to the bonus payment date, it is isolated as opposed to part of a global restructuring exercise and your bonus is one of the really big ones. That is not to say it is an easy claim. The argument would be that sacking someone to deliberately stop them getting their bonus (when they have worked the full year) is a breach of the duty of trust and confidence owed by employer to employee. 

No one has successfully fought one of these latter cases all the way to Trial but the Court has certainly left the door open and suggested that the argument has merit.

Arpita Dutt is a founding partner of leading employment law firm, BDBF. For advice on redundancy contact 020 3828 0350 and see http://www.bdbf.co.uk/employees/dismissals-and-redundancy/ and http://www.bdbf.co.uk/financial-services-professionals/