Getting staff restructuring right

Reorganising staffing structures in the face of budgetary reductions inevitably throws up some significant challenges. Gerry Budd and Helen Cookson outline what local authorities and other public sector bodies need to bear in mind.

As we see the start of 2011, the climate for the public sector, including local authorities, has never been more challenging. More and more responsibilities are being conferred with corresponding reductions in resources. The coalition government's legislative programme for change seeks to radically change the landscape of public services. The pressures on officers and elected members to do even more with even less are increasing.

In this operating environment, scarce resources must be used to full effect and value for money striven for at every opportunity. Local authorities have known for a long time that difficult decisions would have to be made in light of the Spending Review. Some local authorities had already begun the process of restructuring and reorganising workforces, but there is little doubt that the announcements made recently will mean that many more such difficult decisions will be made.  Inevitably the new agenda is fundamentally challenging how authorities meet their obligations, and use their staff to do so. This will involve doing things differently, changing management accountabilities, and reorganising staffing structures, including joining together with other authorities.

There are many reasons why an authority approaching any re-organisation of its staff should do so in a careful and considered way, not least in order to avoid the risk of any challenges but also to seek to ensure that such changes are introduced transparently and fairly, recognising at times, that difficult decisions affecting the lives of individuals need to be taken.

Authorities can achieve this objective by bearing in mind a number of key issues in relation to the re-organisation of services and dealing with individuals finding themselves in the centre of such processes.

A decision to reorganise and restructure a team or service delivery area is never a decision which should be taken lightly. There are both practical and legal issues to consider and these issues can become particularly acute where reorganisation impacts on the most senior officers/managers. On the practical side the departure of top level managers can have a disorientating effect on colleagues and the process can be particularly difficult if it is more junior staff who have to manage the process.

The Issues

Legal issues to bear in mind in any reorganisation of staffing structures include:

  • The Guidance issued in October 2010 by the Equality and Human Rights Commission in relation to compliance with the authority's duties generally under the Equality Act 2010 (including the relevance of an equality impact assessment of the impact of any reorganisation proposals) should be considered to ensure any plans pay due regard to the authority's duties in this area;
  • The need to undertake statutory trade union consultation if a redundancy or reorganisation affects twenty or more staff in a 90-day period. Local authorities need to take particular notice of the case law relating to the timing of consultation to ensure it begins at an appropriate time. Several authorities have been successfully challenged for beginning the consultation process too late; several authorities have already reportedly begun the staff notification process.
  • Many local authorities have very long standing redundancy and redeployment policies, perhaps often dating back many years. Such policies need to be carefully evaluated in terms of the expectations of unfair dismissal case-law and against the expectation of the Equality Act 2010 to ensure they meet up to date good employment practice. Thought should be given to updating and refreshing training for managers on handling selection and consultation. Employee support programmes should be revisited.
  • Selection criteria must be reviewed to ensure that there is no unintended direct or indirect discriminatory impact on individuals with any of the protected characteristics set out in the Equality Act and then applied consistently and fairly avoiding their application in cases where, in reality, other procedures are more appropriate (e.g. disciplinary/ capability). Particular care must be taken in relation to apparently neutral and objective criteria, such as sickness absence or performance against targets, which may nevertheless have a discriminatory impact on some protected groups; for example those who have taken absence for pregnancy or disability related reasons. Traditionally length of service is also taken into account which may indirectly discriminate against younger employees. Case law suggests that such criteria will usually be justifiable but nevertheless for audit purposes the reason for its inclusion should be noted and it should not be the sole  criteria applied.
  • Some authorities are fortunate enough not to have had to make any redundancies for many years, but this may mean that pay protection and redeployment agreements are no longer appropriate. Generous pay protection and redeployment policies, entirely appropriate in the past, may no longer be financially sustainable. If changes need to be made to underlying collective agreements enough time will have to be allowed for trade union consultation and negotiation.

Senior Officers

The departure of the most senior officers of an authority can also often raise additional difficult legal issues:

  • Who has the legal power to terminate the employment and how? Strict legislative and procedural requirements apply (and must be contained in an authority's standing orders) in relation to the dismissal of certain "statutory officers" (e.g. the Local Authorities (Standing Orders)(England) Regulations 2001). It is vital to establish the issue of vires at the outset;
  • Is it proposed that the terms of departure will be agreed on a without prejudice basis? This is usually the preferred approach but it is important that all those concerned understand that there is often no such thing as "off the record" in an employment context and this can cause difficulties if negotiations break down but the process has gone too far to make the application of a formal procedure a realistic proposal and this may risk criticism including from auditors;
  • What severance payments are to be paid? It is important that the authority's policy under the Local Government (Early Termination of Employment)(Discretionary Compensation) (England and Wales) Regulations 2006 is considered and applied, but it is also vital to ensure that such policies have been updated to take account of changes in the pensions and age discrimination legislation. Bear in mind that the severance terms must result in an outcome in the best interests of the authority. Has a full cost benefit analysis been undertaken which takes into account additional pension actuarial costs/ strain payments as well the benefits directly received by the individual? If not the severance arrangements may no longer be justifiable when the full cost is calculated. Consideration should be given (involving the Chief Finance Officer) as to whether the Council's external auditors should be briefed/ consulted;
  • Have all relevant policies been considered? It is often easy to overlook the application of the general HR policies referred to above when dealing with senior staff – is there a policy which could delay a non consensual termination for example? Care must be taken with timing. A number of public sector employers have faced claims when procedures have been circumvented to ensure a redundancy takes effect before an individual reaches the trigger point for immediate pension access;
  • Do the severance terms contained in any compromise agreement cover all relevant aspects including confidentiality, handover and future co-operation if required? Are consistent statements being made about the reasons for departure internally and externally? If there is a potential discrimination issue, care must be taken in light of the problems with the drafting of the relevant provision in the Equality Act (s147) which calls into doubt the validity of the complete compromise of discrimination claims. This risk can usually be remedied though careful drafting of the compromise agreement itself but it is particularly important that old standard forms of compromise agreement are not hastily updated and reused without legal review.

Management practices

Of course any restructuring sensibly undertaken will not only address purely legal issues but also sound management practices. A number of other (less purely legal) matters should also be taken into consideration. These pointers should also help authorities and officers having to deal with these difficult issues (whilst minimising the risk of legal challenge):

  • Be as clear as possible about what you want to achieve and why.
  • Secure unambiguous management and political support for the changes being progressed – ensure leaders (be they managerial or political) are visible and truly committed.
  • Communicate what you want to achieve to stakeholders, involving staff and their representatives/ trades unions, including the context for the changes – and do this consistently, positively and repeatedly throughout the change process.
  • As far as possible be straight with people – a process that seeks to be transparent is more likely to be accepted and/or tolerated.
  • Within any existing constraints seek the views of stakeholders if possible at a formative stage but also as the initiative progresses, particularly in terms of the detail – there is no monopoly on good ideas.
  • Apply any re-organisational principles in a consistent, fair and transparent way.
  • Never underestimate the importance of effective management of staffing/HR issues – an approach which recognises the needs of individuals to be treated with dignity wherever possible in the process can go a long way.

As we start 2011 local authorities are facing a series of unprecedented challenges and the skills and support of the council's lawyers have perhaps never before been in such demand. As well as providing advice on the issues arising, in general terms, in relation to re-organisations of services and departments, lawyers in local government are well placed to provide support to members in relation to the issues which can arise concerning individuals leaving the organisation and in particular including those at the most senior levels.

Tricky political, constitutional and legal issues often arise in negotiations surrounding such cases and authorities are well advised to recognise that the contribution of the council's lawyers, working alongside finance and HR colleagues is often invaluable. This is but one aspect of today's local government lawyer's increasingly testing workload to be tackled in the coming year.

Gerry Budd and Helen Cookson are solicitors at Trowers & Hamlins. http://www.trowers.com/. Gerry can be contacted on 0161 838 2003 or by email at This email address is being protected from spambots. You need JavaScript enabled to view it..  Helen can be contacted on 0161 838 2081 or by email at This email address is being protected from spambots. You need JavaScript enabled to view it..