Restructuring: How to deliver bad news that doesn’t bite

With Coles recently announcing 400 odd job losses at its Head Office and unemployment figures on the rise, we thought it was time to highlight some of the legal and HR issues arising from restructures.

A number of different commercial scenarios can lead to a restructure.  You might be selling part of your business, moving people between group entities or you might just need to streamline things in your company or within a specific team.  Whilst each set of circumstances will always be different, there are some common considerations.

Show Your Employees Honesty and Respect

Restructures come at a high emotional cost to those affected.  The employees who lose their jobs, lose their livelihoods. The employees who stay on often feel disengaged and guilty.

This is why it is vital that the leaders show honesty and respect towards the employees throughout the process (and on every other day if possible!) 

A restructure will always be a difficult time and there is no point shying away from this in communications with employees.  That said, it is a fine balance as too much doom and gloom is sure to affect your level of employee engagement post restructure.

Listen to your employees as their views and opinions matter.  Irrespective of whether they are staying or going, each employee has contributed to the business in some way or another and they deserve to be heard.  With any luck, they might even have some ideas on how to mitigate the consequences or enhance productivity moving forward.

Communicate Effectively

Effective communication during a restructure is key from a company’s reputational, commercial and legal perspectives.  If you get it wrong (and sometimes even when you get it right unfortunately) employees will openly criticise the company in the marketplace and even media.  You might also find yourself with a legal claim or other indirect commercial consequences if you don’t carefully consider all communications with employees. 

This is why a communication strategy should be put in place before the definite decision has been made to restructure.  Generally speaking, once a “definite decision” has been made to restructure, a company’s consultation obligations under any applicable Modern Awards or enterprise agreements will kick in.  Our clients seek our assistance to develop scripts and FAQs to manage the communications in such a way that is honest and empathetic but which also mitigates the legal and commercial risks to the extent possible.

 Photography / Simon Blackley

Photography / Simon Blackley

Dealing with Job Losses

Restructures unfortunately go hand in hand with job losses.  It might be that a process of voluntary redundancies is followed at first instance (due to requirements in an enterprise agreement, contract or company policy).  This can ease the anxiety surrounding a restructure somewhat as employees feel like they have a level of control over their own destiny.  However, in most cases you probably want to retain managerial control over talent retention and a process of voluntary redundancies does not always allow for this. 

Once you decide that a person’s job is no longer required to be performed by anyone then their position will be redundant.  The processes for selecting those employees whose roles are to be made redundant should always be documented so that these can be used as evidence should a legal claim arise.  

For those employees who are eligible to bring an unfair dismissal claim, you must ensure that you consider any reasonable redeployment options for the employee (as well as comply with any applicable consultation obligations, discussed above).  This will involve a consideration of vacancies within the company (and any associated entities).  What is reasonable will involve a consideration of:

  • the nature of the available alternative position;
  • the qualifications required to perform it;
  •  the employee's skills, experience and qualifications;
  • the location of the position in relation to the employee's residence;
  • the remuneration offered; and
  • any reasonable period of retraining required.

Consider Entitlements

Before communicating with any affected employees, you should determine their entitlements (such as notice of termination, redundancy pay, accrued annual leave and accrued long service leave) so that the ramifications of the redundancy can be fully outlined to them.  This is also important for employees for whom there is a redeployment opportunity so that they can assess their options before deciding whether to accept the alternative role.  Your consideration of redeployment options should also be discussed with the employee irrespective of whether or not any redeployment options are actually available. 

Managing Internal Transfers

When an employee moves from a job with one group entity to a different job in another “associated entity” with less than a three month break between the two jobs, the employee’s service with the first employer will count as service with the second employer (although the period of any break break between the two jobs will not be counted).  This will be relevant for their entitlements in the new role like redundancy pay, notice of termination, and their eligibility for other NES entitlements like parental leave.  The accrued leave balances of employees transferring between associated entities must also transfer and continue with the second employer.  

If the employee is going to be performing the same work (or substantially the same work) for the second employer, there will be a transfer of business which has additional implications.  Any enterprise agreement which covers the employee’s employment will continue to cover them in their new role with the new employer.  Given this can also result in the industrial instrument covering non-transferring employees of the second employer in certain circumstances, we recommend you seek advice before moving such employee as the implications of their transfer may be far more wide reaching than you intended.  

Contractual Changes

Contractual changes such as changes to hours, job structure and remuneration can provide an alternative to job losses where employees are agreeable to these changes.  It’s important that these options (if they exist) are “sold” to employees in a transparent way.  Are they short term or permanent changes?  What circumstances would lead to them changing back to their original conditions? At what point might they become redundant? If an employee agrees to such changes it is important that they sign a new written contract or variation letter so that there is no dispute down the track about what was agreed.

A restructure is ultimately an exercise in change management.  If you want a restructure to be successful you will need consistent focus and belief from all levels of management.  You will need to consider your short and long term goals following the restructure and communicate how these will be achieved to the employees who stay on.  You might need to commit additional resources to implement and deal with the changes.  One thing is for sure, without a plan and some good advice about how to effect the restructure and move forward, the bad news almost certainly will bite. 

If you need help managing a restructure, contact THE WORKPLACE.

The copyright in this blog is owned by The Workplace – Employment Lawyers Pty Ltd.  The content is general information only and is not intended to constitute, or be relied upon as, legal advice.  The use of this blog by any person or company does not create any solicitor-client relationship between the person or company and The Workplace – Employment Lawyers Pty Ltd.