Feature

posted 23 May 2002 in Volume 5 Issue 1

Are there any human resources time-bombs ticking in your firm?

Most professional partnerships, particularly law firms, are better informed than the average employer about relevant labour laws and employment procedures – and yet a surprisingly high number fail to comply with them. Henry Clinton-Davis, a partner, and Cerys Williams, an associate at Brobeck, Hale and Dorr, assess potential problem areas and provide tips for partners and human resources professionals on how to avoid the pitfalls.

Employment is a highly regulated and complex area of the law, hence the scope for error is significant (and potentially expensive). While firms frequently advise clients to review their HR processes and documents for this purpose, many fail to do this themselves, leaving themselves exposed if disputes arise and embarrassed when the failings are revealed in public. Like any other employer, professional practices need to ensure that they have solid mechanisms for internal communication, up to date contracts and policies in place, and a good system of HR risk monitoring to manage potential exposure. This article suggests an approach to human resources due diligence; it also examines potential problem areas and provides tips for partners and human resources professionals on how to avoid the pitfalls.

In some respects, it is expected that law firms (particularly those with strong employment practices) should lead by example and adopt model employment practices and procedures. However, recent well-publicised claims alleging racism, sexism and workplace stress against high-profile law firms and indeed barristers' chambers, illustrate that this is often not the case.

Issues around communication:

Frequently problems within professional practices stem from inadequate systems for internal communication: staff and lawyers consider they are not given enough information about what is going on; they do not understand the business rationale for decisions which affect them; they do not feel that the firm is open about their career paths and they do not have avenues for constructive criticism of those who are managing them. Goals and objectives are not properly understood and failings not addressed until they have become serious. An HR audit of a firm's practices can help address some of these difficult issues, although the strategies ultimately adopted to deal with them may be unique to the individual firm and heavily influenced by its culture. Firms should however consider the value of:-

A proper appraisal system, offering opportunities for feedback and goal setting. A good appraisal system can pre-empt problems before they escalate and motivate lawyers and other staff.

A system for upward appraisal of partners - again the feedback from lawyers and support staff can be invaluable in terms of highlighting management issues, or problems in the work place. Such a system can also form part of a firm's overall risk management strategy. It is worth bearing in mind that health and safety regulations require all employers (including law firms) to carry out risk assessments, and obtaining feed back from staff in a professional practice is clearly vital in that process.

An associates' committee or other body which can provide feedback to the partners. Sometimes lawyers or support staff may feel inhibited about appearing to criticize the firm and a committee can be a useful mechanism for providing unattributed, but hopefully constructive comments.

Management training for partners who are regularly involved in the management of staff. New partners in particular may have had limited experience in this field and may not be aware of the impact their actions have on fee earners with whom they work. Good managers will be able to illicit feedback and take appropriate action on a regular basis and before issues are raised formally through an associates committee.

Confidential counselling service. These services can provide an important outlet for staff who are experiencing problems, whether the cause is domestic or work related. Such services are set to become all the more popular in the light of a recent stress case in which the courts held that an employer offering such a service would rarely be found to be in breach of its health and safety duties in stress cases.

This is by no means a comprehensive review of the available HR strategies, which is beyond the scope of this article. However the short point is that a firm which fails to consider these sorts of issues is likely to be out of touch with the feelings of its key staff and may be expected to face depressing staff turnover statistics.

An audit of HR documentation

A due diligence-style audit should also consider the employment documentation and policies within the firm in order to ensure that the firm is staying abreast of good practice and changing legal requirements. Periodical review of this area therefore has an integral role to play as part of any firm’s risk management strategy.

Careful examination of the three following areas will help pre-empt potential HR problems:

Employment contracts – an important tool in the event of an employee dispute, particularly in the case of departing employees;

The workforce profile - provides insight into business culture and may assist in highlighting inadvertent discrimination and other issues which may need addressing;

Staff policies and handbooks - policies and procedures should be scrutinized to ensure they are fair, effective and being implemented in practice.

1. Employment Contracts

Within two months of commencing employment, employees must by law receive a written statement which outlines core particulars of employment, such as job-title, working hours, salary, pension, sick pay and other practical points. On a pragmatic basis, it makes sense for this information to be included in a comprehensive contract of employment.

Beyond this, however, a well-drafted employment contract is invaluable and can, for example, pre-empt the abuse of intellectual property, confidential information and client relationships. It is the employer's first line defence in a dispute and should cover:

Probationary period and pre-conditions to employment (work-permits, references, medical etc) - employment often commences before these procedural points are satisfied, so ensure that you have the contractual right to terminate if there is a subsequent failure to comply;

Confidentiality – including a non exclusive definition of what is meant by confidential information, covering the sort of information the firm would be most keen to protect (for example client lists, business plans, confidential financial information etc). A clause which is too vague will be very difficult to enforce. In addition include a statement that rights to make "protected disclosures" under whistle-blowing legislation are unaffected. A failure to address that point may render the whole confidentiality clause unenforceable.

Notice period, payment in lieu of notice and garden leave – ensure that you have full flexibility on termination. Garden leave is fairly standard in professional practices so ensure that you have the right to insist on it and to prevent the employee from working for direct competitors during that period. Increasingly the courts are moving to a position in which they will not enforce garden leave if the employer has not reserved the contractual right to put an employee on garden leave.

Benefits information - recent caselaw on bonuses means that particular care must be taken to protect the employer if it intends a bonus to be truly discretionary. Provision of other benefits should be expressly subject to rules of the relevant schemes.

Security monitoring – do you need the right to monitor employees' e-mail, telephone or hard-copy correspondence? Again if you wish to do this, employees must be expressly informed or the firm will fall foul of recent legislation in this area.

Holiday terms - Address limits on carrying-forward holiday and the right to compel employees to take holiday during their notice period. Ensure statutory minimum holiday periods are honoured;

Working hours - if your employees work unpredictable and lengthy hours, consider an opt-out from the limit on weekly working hours set out in the Woking Time Regulations. Law firms have been criticised for asking lawyers to sign “voluntary” opt-outs, but, in reality, most will comply. Bear in mind however that in the case of trainees, this is an area which is monitored by the Law Society;

Prohibition of outside business interests in working time. – ensure that you have your employees' undivided attention;

Intellectual property - bolster statutory provisions as to ownership of intellectual property by providing for employees' co-operation in any further measures necessary to protect your rights. In this context you may also wish to consider your approach to lawyers taking the firm's precedents with them when they leave;

Restrictive covenants - consider whether you wish to be able to restrict an employee's rights to target your clients or poach your staff on behalf of a competitor after he or she leaves the firm. To be enforceable these covenants must be meticulously tailored to your business and go no wider than is reasonable to protect your legitimate business interests.

2. Workforce Profile

An appreciation of the predominant characteristics of your workforce can give useful clues as to your firm's culture and may also highlight potential problems. In order to create a workforce profile, each worker's commencement date, position, status (i.e. full-time, part-time, consultant), age, sex and remuneration details should be mapped. This will inevitably mean that you are storing and processing personal data about the employee and proper consents under Data Protection legislation should be obtained.

The workforce profile should highlight issues such as:

Pay patterns

Is pay consistent and justifiable according to objective criteria or are there - even inadvertently - any gender or race differentials that may prompt discrimination or equal pay claims? Are all workers receiving the National Minimum Wage (currently £4.10 per hour for adults) ?

Employees age and duration of employment

Look at the average age and turnover of your employees. Obviously a high turnover rate should be promptly investigated, perhaps by means of exit interview, as it may indicate an underlying problem that may eventually give rise to claims or to the loss of further staff.

A check on the age profile of the firm may also reveal bunching within certain age bands, which may not bode well for career paths within the firm or suggest that not all levels within the firm are properly staffed.

It is important to bear in mind that age discrimination legislation will soon be with us so consider whether the age profile of your workforce indicates that you may inadvertently be discriminating against older workers. Whether age discrimination legislationwill ultimately lead to a further review of compulsory retirement ages remains to be seen.

Sex of employees

Monitoring the sex of your employees may again reveal any inadvertent discrimination. If for example representation between the sexes is pretty equal at junior levels but then drops off alarmingly at more senior levels, does this indicate discriminatory attitudes or an unwillingness to consider flexible working patterns for working mothers? Bear in mind that an outright refusal to consider part time working for a mother returning from maternity leave may amount to indirect sex discrimination. The firm should consider whether, and if so how, it can accommodate partners as well as employees who wish to work part time, rather than preventing all debate about the issue.

Atypical Workers

The contract terms of part-time workers should be compared with their full-time equivalents. By law, the terms of employment must be comparable on a pro-rata basis. Also, significantly more part-time workers are female which means less-favourable terms could be discriminatory.

Does your firm engage services from individuals who are not employees? If so, consider whether they may nonetheless be "workers" within the meaning of relevant legislation. The definition of "workers" whilst including employees, also extends to cover individuals who are are engaged under a contract for personal services and, even if they are genuinely self-employed, they may benefit from work-related legislation. For example, laws concerning discrimination, working hour limits and paid holiday will apply to workers. Also, take note that the title of "worker", "contractor", or "consultant" will not prevent the courts or tax authorities from determining that a particular individual is actually an employee and therefore entitled to benefits and employment rights. Therefore carefully crafted contracts should be used when engaging non employees to try and reduce this risk. Bear in mind that if a consultant is found to be an employee, the employer will also be liable for unpaid employer's national insurance contributions, which could be very expensive.

Policies, Procedures and Handbooks

A review of employee-related policies and handbooks will also help reveal employment practices that could present future problems, or highlight the fact that policies in critical areas of HR management are missing.

Disciplinary and Grievance Procedures

It is advisable for every employer to have (and comply with) a written disciplinary procedure. The failure to follow disciplinary procedures will make it hard to persuade a tribunal that a misconduct termination was fair. However always avoid incorporating any disciplinary procedure into employees' contracts of employment: additional compensation can be awarded where an employer fails to go through the hoops set out in a contractual disciplinary policy. Likewise it is prudent to include a written grievance procedure in the staff handbook. Dissatisfied employees who cannot seek redress through grievance procedures may simply leave or, worse, commence legal action without engaging in dialogue.

Equal Opportunity Policy

Companies which adopt equal opportunities policies and implement training in this area can respond better to claims of discrimination if they arise. While employers will usually be vicariously liable for acts of discrimination by its employees, it may be a defence to show that procedures were in place to prevent and discourage such behaviour. However merely having a policy in place will not be enough. Employers must also show that they took proper steps to monitor and enforce the policy and provide effective training to staff.

Computer Use Policy

Law firms should include in their staff handbooks an effective e-mail and internet policy. There have been a number of high profile scandals involving lawyers, caught downloading offensive material and then disseminating it by e-mail. The policy should provide that the firm has the right to monitor and intercept email communications addressed to or generating from work premises and that employees should not regard such communications as private. Include a statement that the product of such interceptions may be used in evidence in disciplinary, or even legal, proceedings. It is also sensible to outline the level of personal internet and email use that the firm will tolerate and always to include a prohibition on the downloading of offensive materials. Remember also the spectre of vicarious liability for defamatory comments made in employee's email and issue appropriate warnings.

Other policies

Other regulated aspects of the employment relationship that should be covered by appropriate policies are:

Sickness absence
Pregnancy
Parental leave (introduction of paternity leave is imminent)
Leave for dependants and domestic situations
Health and safety

Conclusion

Law firms, whilst counseling clients to audit their HR practices and documentation, frequently put similar audits of their own practices on the back burner. They do so however at their peril. Audits may reveal shortcomings in employment practices which can be addressed before it is too late. By implementing proper processes within the firm, the partnership can increase employees' sense to attachment to the firm, boost morale and ultimately protect its key asset - its people.

If you discover the problem too late…

44% of employees experiencing employment problems leave their employer; the average recruitment cost of replacing an employee is £3,500; for high-earning employees, replacements costs may be much higher;
Employment tribunal applications have trebled since 1990. Last year, more than 130,000 employees took their employer to the tribunal;
64% of Applicants had not attempted to resolve the problem with their employer and 5% had previously made tribunal applications
Numbers of employees receiving unfair dismissal awards of more than £10,500 increased by 10 per cent over last year and in January this year the biggest ever tribunal award was made - Schroder Securities were ordered to pay £1.4m to Julie Bower for unfair dismissal and sex discrimination. They are appealing the award;
7% of sex claims are brought by men. 15% of race claims are brought by white people

Henry Clinton-Davis, partner and Cerys Williams, associate, Brobeck Hale and Dorr. Henry can be contacted at clinton-davis@bhd.com or Cerys at williams@bhd.com