Senior executives and company directors have been no more immune to redundancy than anyone else during the economic downturn. Whilst there is talk of the tide turning, people are still losing their jobs.
Employment disputes and redundancies are a typical feature of troubled economic times as companies react to dwindling revenues by firing employees at all levels in order to cut costs. But lawyer Elaine Aarons, a leading employment expert who specialises in advising executives at international law firm Withers LLP, believes this recession has been different.
She explains: “Firstly, as we went deeper into the downturn, we saw some top performers becoming the casualties of redundancies and reorganisations. Some employers, having already parted company with the poor performers, and being faced with an imperative to further reduce head-count, had to consider making the cream of the crop redundant. For someone who has always had glowing appraisals, this can be hard to swallow. We have been seeing appraisals undertaken this year where the tone and content is completely out of step with what has been said about the very same individual in previous years. Suddenly they are being told that they are not doing well and have been singled out for redundancy. Questions are being raised over the validity of the appraisal process, with allegations that procedures are being used manipulatively to serve the company’s needs.”
According to Mrs Aarons, there has been a higher incidence of “high-stakes discrimination and whistle-blowing claims” in this recession.
With a wide range of clients including FTSE 100 and 250 directors, partners in law firms and accountancy firms, chief executives and finance directors of companies backed by private equity and investment bankers, she has been involved in cases against some of the best-known companies in the world, and is currently conducting a number of very substantial discrimination, whistle-blowing and bonus claims.
“Employers have a tendency to be cynical about these claims, but in our experience the ones we pursue are genuine cases. Not only is the number of claims up but people are also getting more savvy at collating evidence, so we see clients coming to us with more solid cases. This can happen where employees suspect for some time that their positions are in danger and begin to assemble evidence of wrongdoing on the employer’s part whilst still in the job.
“Compensation in a discrimination or whistle-blowing claim is uncapped, which makes it a much better way of covering for long-term unemployment than a simple unfair dismissal claim where any compensatory award would be capped at £66,200.”
Inevitably, in a recession, there is an increase in employment disputes as people are likely to be out of work for longer — particularly the most senior employees where there are even less openings — and compensation increases accordingly. Even with green shoots of recovery around, people are very anxious about how long they will be out of work. Unlike the American system, she points out, “Mostly, UK courts compensate only for loss of earnings so compensation would be relatively low where an employee made redundant quickly finds a new job.
“We are seeing an odd mix,” says Mrs Aarons, a regular media commentator. “The volume and intensity of the disputes flowing from dismissal has definitely increased, whilst at the same time, we are drafting some extremely lucrative contracts. At the top end there is definitely some serious recruitment taking place. Many of those being recruited, however, are being headhunted from their current jobs. So the anxieties of a dismissed executive regarding the time it will take to get their career back on track seem to be well founded.
“A startling statistic that is recession-related is that currently more than 60 per cent of executives in post are looking for a job elsewhere. Employees’ loyalty to their current employers is at a very low ebb.
“This has a major effect on the job market and is a sign of serious instability as we are also seeing an increase in executives consulting us relatively soon after finding a new job when things are not working out as well as hoped. Sometimes there are legal remedies when this occurs. Often there are not. The key is ensuring the contract is well negotiated before joining.”
An Orthodox mother-of-three, Mrs Aarons has been working in the City for three decades. She graduated from the University of London, started articles in 1980 and became a partner in 1989. She helped found the Employment Lawyer Association in 1992. She is also a member of the Hidden Brain Drain, a New York-based task force examining issues relating to the advancement of women and ethnic minorities in the workplace. The synagogue she attends is the Golders Green Beth Hamedrash.