As the General Counsel (GC) or sole in-house lawyer of a fast-growing business, we understand you are likely juggling responsibilities across multiple disciplines, including employment law. If employment law is not an area you’ve specialised in or had much experience of, knowing how to manage some of the higher stake employment matters you’re likely to encounter will help position you as a key strategic partner to your leadership team. This guide is designed to help empower you in these areas by highlighting the main priorities to consider.
While many tasks that land on your desk are manageable, there will be moments when the complexity or level of risk require specialised expertise. Our employment law solicitors are here to support you in navigating these high-risk situations and help you in your role as a strategic advisor in the leadership team.
Key employment matters:
- Employment status
- Recruitment and legal risks
- Employment contracts
- Equality laws and discrimination
- Managing executive terminations
- Handling high-stakes litigation
- Reputation and crisis management
- Redundancies and restructures
- M&A transactions
- Environment, Social and Governance (ESG)
- When to seek external support
Employment status
Every business has a unique workforce composition, varying in size, location, and staffing models. From traditional employees to contractors and agency workers, understanding your company’s workforce structure is essential.
In the UK, staff may have different categories of employment status. This is a fast-changing area, but for now the categories of staff are: employee, worker or self-employed (eg contractors/consultant/freelancer).
Different legal rights apply depending on a staff member’s employment status. For example, employees are entitled to the core legal protections, such as the right not to be unfairly dismissed, the right to a statutory redundancy payment, and notice periods. Workers and the self-employed get very few rights in comparison. Employment status also affects how staff are taxed and the liabilities can be costly if you get it wrong.
Strategic priorities:
- Map out your workforce, from senior management to frontline staff, to gain clarity on the different roles, functions, and employment arrangements within your organisation.
- Work with your HR and procurement teams to make sure the right contracts are being used when onboarding new staff.
- Conduct a workforce audit to identify potential employment status misclassification risks, including whether IR35 may apply and implement corrective measures.
Recruitment and legal risks
As a GC, you may need to partner with your HR and recruitment teams on different legal issues that can arise when hiring new staff. One of the key considerations for any GC is making sure company recruitment processes comply with the Equality Act 2010 (EqA). The EqA prohibits discrimination related to protected characteristics such as age, gender, race, and disability. This means that job advertisements, interview processes, and hiring decisions must be carefully managed to avoid claims of discrimination.
Additionally, right-to-work checks are a legal requirement in the UK. Employers must verify that all employees have the legal right to work in the UK, and failing to do so can result in substantial fines and damage to the company’s reputation. It’s also critical to ensure that any pre-employment background checks comply with data protection laws.
Strategic priorities:
- Together with HR teams, develop inclusive recruitment policies . Train staff involved with recruitment on topics such as compliant job advertisements, carrying out background checks and questions to avoid asking candidates during an interview.
- Check current processes around right to work checks. Immigration rules change quickly – our immigration and employment experts work closely together and can provide alerts to you and your HR and recruitment colleagues.
Employment contracts
Hiring talented employees comes with enormous benefits, but potential risk too. Depending on their role, employees might be handling commercially sensitive information or creating significant amounts of valuable IP. In a worst-case scenario, they might leave the business for a competitor. A well-drafted employment contract that protects the business from these risks is worth the investment.
Alongside all the basic terms such as start date, job title and remuneration, employment contracts should include certain business protection terms, particularly for senior or key employees. This includes well-drafted notice periods, robust definitions of confidential information, terms and conditions around the vesting of employee-created IP, and post-termination restrictions preventing employees from soliciting or dealing with customers and staff after they leave.
Template employment contracts are great for efficiency. However, take care to ensure that templates are appropriate for the role or level the business is recruiting for. A basic “off the shelf” contract will rarelyprovide the business with sufficient protection when hiring senior or key employees.
Strategic priorities:
- Work with HR and recruitment teams to audit your current HR templates and employment contracts. Work on a system for choosing which template to use in different hiring scenarios. Review templates and make sure they include core protections for the business.
- Review a sample of employment contracts at each level of the business, from senior leadership to early career employees. Identify and remedy potential risks in the contracts (eg lack of post-termination restrictions in senior management contracts).
- Review and update your templates periodically (we recommend annually) so they stay up to date with legal developments. We expect a significant raft of changes in employment law in the coming year and can advise you on the most efficient way to update your documents.
Equality laws and discrimination
As stated above, the EqA protects employees and workers against discrimination related to protected characteristic such as race, gender, pregnancy and disability. This includes protection against direct and indirect discrimination, harassment, and victimisation. While GCs may not be involved in every people-related decision, it is crucial for them to ensure that company policies and practices are inclusive and non-discriminatory, particularly in areas such as performance management, disciplinaries and grievance, promotion and reward decisions, and employee terminations.
As a GC, we understand that your role isn’t just about managing individual cases, but about overseeing the bigger picture. This involves monitoring patterns and trends in complaints, grievances, and claims to identify any systemic issues that might indicate underlying cultural problems within the organisation. By fostering collaboration between legal, HR, and senior management, you can help create a workplace culture that promotes inclusivity and minimises the risk of discrimination claims.
Failing to address these broader issues can lead to discrimination claims in an employment tribunal, which carry significant financial risks and can become public, potentially damaging the company’s reputation. This means it’s essential for GCs to take a proactive approach, ensuring that the organisation not only complies with the law but also strives to build a fair and inclusive work environment.
Strategic priorities:
- Monitor trends in staff grievances, exit interviews and claims to identify any patterns or trends that may indicate systemic issues or areas where the company’s policies may not be as inclusive as intended.
- Partner with HR to ensure that all company policies, particularly those related to performance management, disciplinary actions, grievances, promotions and terminations, comply with the Equality Act 2010 and promote inclusivity.
- Support HR in a programme of training people managers and all staff on equality and diversity, ensuring that everyone is aware of their responsibilities and the importance of maintaining a non-discriminatory workplace.
- Engage with senior leadership to discuss the importance of an inclusive culture and the potential risks of discrimination claims.
Managing executive terminations
Dismissing senior executives and business critical employees can be some of the most sensitive and risky people issues you can be involved in as a GC. Alongside legal risks, senior exits often come with significant financial and operational risk, meaning a strategic approach to implementing these exits is needed from the outset.
In the UK, senior executives are often employed by the business under detailed employment contracts known as service agreements. These include key terms around notice periods, garden leave, confidentiality, intellectual property, restrictive covenants and remuneration, sometimes including high value benefits such as bonuses and LTIPs, which will all be relevant when dismissing a senior employee. If the senior executive is also a statutory director of the company, the service agreement will include terms relating to their duties as a director, but you will need to approach directorships from a corporate governance perspective too.
Before implementing an exit of a senior executive, it’s critical the Board is aware of all termination payments and other benefits to which the executive may be entitled on termination. Some businesses may need shareholder approval before making these payments or have market disclosure requirements. A thorough review of the service agreement and accompanying bonus and share plan rules should inform the contractual entitlements.
Most senior executive departures are implemented as part of a mutually agreed exit. It would be unusual to subject an underperforming senior executive to a performance management process . However, senior executives will still have protection against unfair dismissal if they have sufficient service, meaning you will need a robuststrategy for implementing the exit to take to the Board.
While understanding the legal position is one crucial aspect of an senior exit, you are likely to also be working cross-functionally with a range of internal stakeholders. This might mean overseeing market-facing communications with your PR team, assisting HR leaders with employee-facing communications and working with finance on administering termination payments. Senior executive departures require not just a good grasp of the legal requirements, but strategic direction too. We cover this in more detail in our article: Dealing with senior exits.
Strategic priorities:
- Engage with the Board as early as possible and make sure they’re aware of the legal process and potential timeframes for dismissing employees. You will also need to work with the Board to maintain legal privilege over the process.
- Thoroughly review the senior employee’s terms and conditions of employment, as well as any share plans and incentive documentation. Senior executive terms and conditions sometimes include generous payments that are triggered on exit, so it’s important to unearth these at the outset.
- Formulate a strategy you can propose to the Board on implementing the exit, including the legal and financial heads of terms for the exit, correctly using the rules around without prejudice and protected conversations (under s111A Employment Rights Act 1996).
- Create a confidential cross-functional team to maintain alignment on the exit and ensure the business has approved any budget for termination payments.
- Support HR and managers in handling the exit process, including help with drafting of necessary documentation, such as meeting scripts, off the record letters and draft settlement agreements.
Handling high-stakes litigation
Overseeing disputes and litigation is a critical part of a GC’s role. In the employment context, this could include claims such as unfair dismissal, breach of contract or sexual harassment.
In the UK, the Employment Tribunal system allows employees to bring claims against their employer (or usually former employer), generally within three months of termination or the act complained of. Successful claims can have financial consequences through compensation awards. Employment claims can also damage a company’s reputation and divert significant management time and attention away from the business.
It’s important for GCs to have a strategy in place for mitigating the risk of employment litigation. GCs can add value here, through strong partnerships with HR and senior leaders. For example, GCs can provide guidance to HR on handling sensitive employee relations issues such as grievances to reduce the risk of them becoming legal claims. They can also advise on alternative dispute resolution options, such as mediation and confidential exit packages.
When it comes to managing employment litigation, GCs can leverage strong partnerships with external counsel to run the more labour-intensive aspects of employment litigation externally. This external support might include drafting defences and witness statements, managing disclosure of documents and preparing for and attending hearings on behalf of the company.
Strategic priorities:
- Develop a comprehensive strategy for mitigating the risk of employment litigation. Work with HR to review current performance and absence management, disciplinary and grievance, whistleblowing and harassment procedures.
- Identify trends or patterns from current or previous employment claims that could indicate where risk lies within your business. For example, holiday pay claims might suggest a problem with how finance and payroll are measuring and administering holiday, whereas discrimination related claims may suggest cultural issues within the business.
- Submit your defence to an employment tribunal claim quickly – employers usually only have 28 days to respond to a claim. If you don’t have an in-house employment lawyer, our employment team is on hand to support you.
Reputation and crisis management
Highly sensitive employee relations issues can threaten the reputation of any business.
Such issues include matters such as whistleblowing, where employees could make external disclosures to regulators or the press if they don’t feel their disclosure of wrongdoing in the workplace is being taken seriously. This could have serious reputational consequences through negative press and could even invite scrutiny from regulators.
Other sensitive matters that could arise include sexual harassment allegations against senior execs, which would require prompt and robust workplace investigation to establish the facts and mitigate legal risk. Highly sensitive employee relations cases involving harassment could attract public and media attention if not handled carefully, which could damage reputation, customer and investor confidence.
You may also need to offer strategic guidance on situations that pose significant reputational risks, such as allegations of serious misconduct by senior employees, corruption and bribery, or data breaches. Alongside reputational risks, there may be HR matters that create significant business risks, including senior or key employees joining competitors or misappropriating IP and company data.
While these examples carry significant legal risks, we understand the real value GCs can bring here lies in developing clear and effective strategies to proactively address and manage these risks. Having strong relationships with the Board and cross-functional teams is critical in fast-paced crisis situations, as well as trustworthy external counsel you can rely on where needed.
In addition, GCs play a significant role as part of senior leadership in developing a culture where risks are identified and addressed early. This might include working with HR teams on designing appropriate policies such as whistleblowing policies, dignity at work policies and training programs for front-line staff.
Strategic priorities:
- Set up basic policies and procedures for whistleblowing and harassment to set internal guidelines on what’s expected when someone makes a whistleblowing disclosure or complaint of harassment.
- Check in with HR teams regularly on the status of any whistleblowing and harassment investigations and keep the Board appraised of any material risks.
- Deliver training and workshops to HR on the legal and reputational risks that can arise in employee relations situations that could threaten the company’s reputation.
Redundancies and restructures
As a GC, you might be involved, along with the HR team, with a workforce downsizing or restructure. If the downsizing will mean there will no longer be a requirement for employees to perform certain types of work, or even the entire closure of parts of the business, this is likely to be a redundancy situation.
Redundancies can either be small-scale (less than 20 employees affected) or large-scale (20 or more employees affected). Small-scale redundancies are less labour intensive and typically involve a process over a few weeks covering: warning employees about redundancy, holding individual redundancy consultation meetings with affected staff and paying statutory redundancy pay (for employees with over 2 years’ service). Dismissing employees for redundancy without a genuine redundancy situation and/or a fair redundancy process could result in claims for unfair dismissal, but most HR professionals will be aware of these risks and should be comfortable handling these processes.
Large-scale redundancies are more complex and involve both individual and collective redundancy consultation with employee representatives or trade unions in accordance with specific timeframes (usually either a minimum 30 or 45 day collective consultation process). They also require formal notifications to the government about the redundancies.
Failing to comply with collective consultation rules could result in employment tribunal claims and fines. The requirement for consultation might mean HR need to run elections for employee representatives. You may therefore need to partner more closely with HR on large-scale redundancies. If you are operating in a unionised environment, you also need to support HR leaders to field questions from trade unions who will likely scrutinise collective redundancy processes closely.
As a GC, you will likely play a key role in communicating redundancies to the wider workforce and external stakeholders (if required). HR and PR teams will count on you to craft announcements that convey the facts with empathy, while minimising exposure to the company. Having a clear and consistent redundancy rationale from the outset and running redundancy processes in accordance with legal requirements will mitigate legal risks.
Strategic priorities:
- Formulate a clear redundancy rationale early on and make sure it meets the legal definition of a redundancy under employment laws.
- Check the number of employees who are likely to be affected by redundancy proposals and whether collective consultation requirements apply – as the timelines for collective consultation can be lengthy, this might affect Board decisions on communications.
- Formulate a process and communications strategy to implement the redundancies seamlessly.
M&A transactions
Expanding the business through acquisitions is an exciting time for any business. As a GC, you will be seasoned in share and asset sales and may have worked with employment law colleagues on the employment law aspects of such transactions.
Whether you’re structuring an acquisition as a share or asset sale, you will need to work closely with HR and finance teams to understand the legal and financial risks that might come with the employees you’re acquiring. This means thorough due diligence on any onerous or unusual terms in employee contracts, getting information on any pre-acquisition disputes, and complying with TUPEif the deal is structured as an asset purchase.
Depending on the scale of the deal, corporate transactions might result in changes to senior management, or the need for retention bonuses for key employees that will be integral to the success of the business post-completion. Close collaboration with the Board and cross-functional teams can help ensure that the transaction proceeds smoothly and the business is set up for success following completion.
Strategic priorities:
- Carry out thorough HR due diligence to identify any potential liabilities you might inherit when acquiring a new business and address them in the commercial terms through employment indemnities and warranties.
- Discuss post-completion people integration plans with leadership and HR teams before the acquisition and ensure there is in place a strategy to help with cultural alignment. Also identify any proposals that could carry legal risk (eg plans to make staff redundant or change terms and conditions).
Environment, Social and Governance (ESG)
GCs are increasingly taking an active role in developing and overseeing their company’s ESG programs.
While a significant portion of their involvement tends to fall on the ‘G’ (eg developing robust governance policies, complying with regulatory requirements, and responsible business practices), there is significant opportunity for GCs to add value across a broader range of ESG initiatives that cross over into HR and employment law.
GCs can promote ethical employment practices by ensuring employees have well-drafted employment contracts and policies. They can minimise the risk of unethical employment practices by ensuring full right to works checks are carried out for every new hire, and that supply chains are free of any forced labour through supplier onboarding screening and questionnaires. GCs can also encourage an open and transparent working environment with clear reporting channels for suspected workplace wrongdoing.
From a diversity, equity and inclusion perspective (DEI), GCs can incorporate ESG principles into employment practices by promoting fair and inclusive decision-making when it comes to recruitment and promotion. GCs can also play a crucial role as sponsors or allies for employee resource groups.
Strategic priorities:
- Formulate an ESG program with support from senior leadership and create a framework for your program with clear and measurable goals.
- Develop and implement effective policies that promote DEI across all levels of the business. Align recruitment, promotion, and remuneration practices with your company’s ESG goals.
- Work with HR and procurement teams to ensure recruitment, employment and supplier sourcing complies with legal requirements and overall reflects a commitment to responsible business.
- Develop policies and procedures that safeguard employee well-being and engagement (eg encouraging employees to use annual leave entitlements, designing employee incentive programs).
When to seek external support
The extent to which GCs are involved with employment law and HR matters varies depending on business size and needs. Some GCs rely closely on external counsel for specialist advice, whereas others are deeply involved in managing these issues in-house. As a GC, you can offer tremendous value to your organisation by combining your legal expertise with strategic insights to mitigate HR risks.
There have been many changes in the employment law landscape this year, with further developments set to take place in the next year. Whether you need an experienced sounding board, help staying up to date with legal changes, or hands-on help with tasks that fall outside your in-house skillset, our employment law solicitors are here to help. We provide tailored advice and practical solutions that will ensure your legal strategy aligns with your business goals.
