Introduction
Failure to adapt to the prevailing business environment can often hinder a company’s growth. For this reason, restructures are necessary, whereby a company assesses threats and opportunities in the prevailing environment and aligns its strategy to match its objectives. One of the features of corporate restructuring is the reorganization of its workforce. Specifically, specific roles are reframed or discarded, whereas staffing requirements are restated. As a result, certain employees may find themselves surplus to requirements, primarily when the company performs poorly due to internal or external factors.
Depending on a business’s size and complexity, the restructuring process may be easily achieved or near impossible to pull off successfully. Moreover, as with many other significant economic decisions, firms often have several options they can pursue with differing outcomes. Several legal aspects arise when a firm embarks on a corporate restructuring concerning employee contracts. The restructuring firm must consider all the possible legal and employee relations consequences of the available options before implementing the most feasible one.
Four possible restructuring models for Mohan Electronics will protect it from going under. Each model has benefits for the company and consequences for the workforce. However, specific legal protections exist to safeguard employees from some of the adverse side effects of a restructuring or adversarial action by the employer. Unions are one of the legal hurdles that can derail a restructuring program and potentially entangle Mohan in a series of costly legal battles.
Ultimately, firms like Mohan Electronics in the UK must ensure long-term survival in a challenging business environment created by the COVID-19 pandemic and the historic Brexit decision. Thus, both sides must compromise to some extent to ensure the firm’s continuity for the interests of all parties. In this essay, the four options will be discussed in detail, focusing on their legal and employee relations impacts on Mohan Ltd.
Option One: Redeployment, Closure of One Site and/or Implementation of a Work from Home Program
Closing one site and redeploying the workforce to another could have serious legal repercussions. Assuming that Mohan redeploys and integrates the workforce from the closed site with the workforce of the existing site, there is likely to be a series of promotions, demotions, and job transfers. Lockwood and Nath (2021) assert that employers should be keen when changing their workers’ employment terms. In particular, workers who, due to redeployment, have their occupational titles, pay, and allowances reduced can sue the employer if they feel unfairly treated and personally targeted by adverse effects of the new organizational structure.
For instance, assuming that there were five floor managers at the closed plant and the retained plant can only accommodate an additional three selected from the five, with the other two taking on lesser roles. The two overlooked floor managers can sue the employer for discrimination, especially if they are from a social group recognized as disproportionately impacted by the existing socioeconomic structure (Lockwood & Nath, 2021). Notably, in employment discrimination suits, the burden of proof lies with the claimant. Therefore, any documented history of employer insensitivity toward a particular employee or social group can considerably foster the claimant’s arguments.
Another possible legally based obstacle to the redeployment proposal is the employees. In particular, employees can legally refuse to be redeployed. According to the Fair Work Act of 2009, employers must consult with their employees concerning any upcoming redeployment that could impact them (Walpole, Kimberley, and McCrystal, 2020).
After restructuring or reorganization, the employer must also offer the employee all possible organizational roles. Additionally, employees may reject a redeployment offer if they feel it is unacceptable, especially if it involves taking up a lesser role and pay. In such a case, the employee must then be declared redundant and paid the redundancy or severance pay stated in their terms of employment.
Thus, if Mohan elects to redeploy its workers to a new site, a possible consequence is certain workers rejecting the redeployment and demanding their redundancy pay. Since such an action is enforced by employment law, Mohan should reasonably prepare financially to make such payments for a forecasted percentage of the workforce. Notably, employers consider redeployment a less costly and more legally safe alternative to retrenchment (Stuart et al., 2021). However, employees can dictate the course of redeployment schemes to their employers.
Work-from-home (WFH) regimes were implemented rapidly by employers worldwide following the pandemic. Several legislations concerning employees support the WFH programs as a cost-effective employment option that simultaneously facilitates employee job satisfaction. The Telework Enhancement Act of 2010 mandates employers to provide their workers with an executive policy framework under which feasible roles can be carried out by employees working from home (van der Lippe & Lippényi, 2019).
However, one of the possible legal implications that could arise when WFH regimes are implemented concerns expenses. In particular, whether the employer or employee should meet the costs associated with working from home. In this case, workers eligible for WFH may require a home office complete with a workstation, telephone, and other office amenities. In certain jurisdictions, the employer is supposed to reimburse the employee for any expenses incurred in furtherance of the company’s WFH program (Nakrošienė et al., 2019).
However, in certain jurisdictions, the costs of working from home can be borne by the employee, and the assets bought remain the property of the employee in perpetuity. Mohan should be keen on this aspect, as cost savings may be possible.
Another consequence of WFH programs is that the employer could be forced to take additional legal steps to safeguard against data privacy breaches. In particular, employees working from home could disclose sensitive organizational information to third parties (Chanana & Sangeeta, 2020). Thus, the employer must take additional measures to protect their data from being breached. In this case, Mohan Electronics must consider the workers they plan to deploy on a WFH program and whether they handle sensitive information.
In some cases, Mohan may employ additional security features to ringfence it against infiltration in their information-technology framework. Additionally, they must formalize data security agreements with their workers and, in some cases, offer the necessary training on the protocol for handling sensitive documents and information. This way, they can have the grounds to take legal recourse if an employee negligently or carelessly discloses sensitive information used to undermine Mohan Electronics.
While WFH programs have been lauded as the potential future of work, they present several challenges to employee relations. Firstly, WFH programs effectively isolate workers from their colleagues, the organization, and its values (Kramer & Kramer, 2020). As a result, prolonged WFH can cause workers to develop mental stress and demotivation. Moreover, certain workers have a stressful domestic environment characterized by marital problems and other such stressors. Such workers may experience a dip in productivity due to being distracted and unfocused as they work.
Moreover, workers under WFH programs may become overworked, especially if they cannot effectively organize their work schedule and domestic duties. This may lead to them resenting their roles and developing apathy toward their jobs. Human resource experts posit that employees thrive in an environment that fosters information sharing, close social proximity, and organizational culture and values (van der Lippe & Zoltán Lippényi, 2019). Mohan Electronics must consider that these elements of employee relations and the working environment are missing under WFH programs.
In summary, if Mohan Electronics settles on redeployment as the most feasible course of action, they must consider the legal implications of changing their workers’ employment terms. Mohan Electronics must make legal and financial preparations if workers refuse to be redeployed and demand a redundancy package. If Mohan chooses to combine the redeployment with a WFH program, Mohan’s legal advisors must prepare a legal framework that clearly explains how and which party will incur WFH expenses.
Moreover, they ought to formalize and implement a legal framework for data security to prevent and protect Mohan Electronics from the adverse effects of data privacy breaches. While WFH programs have been widely implemented by businesses following the COVID-19 pandemic, Mohan Electronics should note that the WFH model mentally strains the employee. Sometimes, it may create a poor working relationship between the employee and the organization.
Option Two: Reducing the Total Workforce by Around One-Third but keeping both Sites in Operation
Employers explore Redundancies as the final and least desirable option during restructuring. MacKenzie and McLachlan (2022) point out that during the height of the COVID-19 pandemic, 37% of United Kingdom employers used tactful redeployment to avoid laying off workers. In commonwealth jurisdictions, employment law mandates the employer to exhaust all avenues for redeployment before making redundancies (MacKenzie & McLachlan, 2022).
For Mohan Electronics to have grounds to reduce the workforce by one-third, they must demonstrate that they have explored all other possible options, including redeployment, furloughs, and WFH programs. Their legal team must be capable of demonstrating this fact to the court in case a suit is brought up against them for wrongful dismissal. Moreover, there will be attendant inquiries regarding which employees were declared redundant and which criteria were used when selecting them. Such inquiries can easily morph into questions regarding the company’s historical treatment of employees and marginalized persons. Therefore, the legal team at Mohan Electronics will have to prepare for various scenarios if they declare a massive section of the workforce redundant.
Some legislative acts, albeit temporarily enforceable, can prohibit companies from declaring redundancies. A case in point is Decree-Law 10-G/2020, part of the Portuguese government’s response to the COVID-19 pandemic (Carvalho, 2020). It sought to prevent employers from laying off staff due to pandemic-related operational setbacks. The decree required employers only to furlough staff at reduced wages over a period.
In return, the Portuguese government’s social security department would reimburse employers at least 70% of the costs incurred over this period. Thus, besides redundancies having legal implications, they also have social consequences. Governments often try to stave off unemployment as it severely undermines political popularity and may result in social unrest.
In some cases, certain employment laws may give labor courts the discretion to revoke permanent dismissals issued by employees over some technicalities (Carvalho, 2020). Therefore, Mohan Electronics must consider the possibility of any laws or acts of decrees that protect employees from being declared redundant. Moreover, they are well advised to collaborate with social security services if there is a possibility of arrangements that could prevent permanent dismissals.
One employee relation problem that arises with this proposal is the possibility of the retained employee being overworked. Notably, Mohan Electronics seeks to dismiss a third of the workforce while maintaining operations in both plants when it has admitted to, at times, having labor shortages. Firstly, this implies that the retained workers will bear the work formerly undertaken by the dismissed persons. Consequently, the retained workers will have a much more loaded workday schedule and possibly a job description that a pay rise should ideally accompany.
Keune and Pedaci (2019) point out that in the EU, there are huge concerns over the declining quality of standard jobs, resulting in “precarious employment.” In such cases, employers are accused of maximizing their returns at the expense of their workers, who may be overworked and underpaid. However, most jurisdictions have extensive laws to protect employees from employer exploitation. In such cases, unions are central to workers’ welfare, which will be discussed explicitly about Mohan subsequently.
Two-fifths of Mohan’s workers are enlisted with the National Association of Electrical Employees & Workers (NAEEW). Presumably, a reduction of one-third of the workforce will likely affect some unionized workers. However, Mohan could dismiss only those workers who are not unionized to prevent an altercation with the union, which could potentially result in a suit for discriminatory dismissal. Galvin (202) notes that profiling workers based on their membership in unions rarely works well for the employer, who is expected to treat every employee fairly by UK employment law.
Specifically, Lloyd and Payne (2019) note that unions must protect workers from adversarial organizational policies that harm the interests of individual workers. For instance, the NAEEW can issue a strongly worded statement against the move to declare employees redundant, as proposed by Mohan Electronics. This could potentially force Mohan to rethink its position in the interests of future relations with the NAEEW and public perception.
Additionally, unions must protect their workers from being overworked and underpaid. Reducing wages may result in certain workers carrying out two jobs, working more hours per shift, or working more shifts to cover the total workload. Unless Mohan Electronics upscales the pay to match the increased responsibility, there will likely be unrest among the unionized workers. Notably, reducing the workforce while increasing the pay for retained workers is likely to result in legal hurdles that do not justify the marginal savings made by Mohan Electronics.
The COVID-19 pandemic resulted in many workers losing their jobs, livelihoods, and loved ones. However, there was a prevailing feeling that employees bore and continued to bear the brunt of the pandemic. Kelly (2020) notes that billionaires and the people who own the world’s largest corporations and employers reported massive increases in their wealth, whereas their employees experienced the exact opposite. In particular, the COVID-19 pandemic saw a massive transfer of wealth from the poorest to the wealthiest members of society.
Therefore, Mohan Electronic’s move to dismiss a section of its workforce over pandemic-related operational constraints can severely hamper employee morale. It is likely to foster the feeling that the organization is ultimately self-serving and aloof to the employees’ needs. Notably, individuals are still reeling from the adverse effects of the COVID-19 pandemic. As such, employee relations with the organization will likely suffer from mistrust and suspicion if such a proposal is implemented. Certain employees fearful of another adversarial restructure in the future are likely to start seeking employment elsewhere. Over time, Mohan Electronics could find itself with a workforce that has adopted a defensive “us vs them” mentality.
In the same vein, individual workers are members of society and contribute to the public discourse prevalent in their society. Dismissing a third of the workforce may adversely impact Mohan Electronic’s public image and goodwill as an employer and retailer. In the former case, if Mohan Electronics ever needs to hire full-time employees, they may ask for specific legal assurances as part of their employment.
Hite and McDonald (2020) highlight the career shock that most people were laid off due to the pandemic. As such, many workers are traumatized and unwilling to take up new jobs without stronger job security assurances from their employers. On the other hand, people displeased by the move to dismiss workers may have a negative attitude towards Mohan, which could translate into fewer sales for Mohan, thus impacting the bottom line. Overall, the legal and executive teams must carefully consider these two aspects before the proposal is implemented.
Option Three: Bringing some or all of the Previously ‘Outsourced’ Work back ‘in-house’
Outsourcing contracts have become increasingly commonplace in corporations as a part of cost-cutting measures. However, they remain binding to the involved parties and cannot be discarded without legal and financial implications (du Toit & Heinecken, 2021). In particular, if Mohan Electronics wants to opt out of their contracts with Securigard Ltd and OfficeKleen Ltd, they must refer to the provisions of the contract that govern the same. If the contracts were of a term of ten years and Mohan wants to end them prematurely at the seven-year mark, they must adhere to any clauses governing such a decision.
If there are no clauses concerning the same, then Mohan Electronic’s legal team must reach an agreement with the two individual companies to negotiate their exit from the contract. If the parties to the contracts cannot agree to an exit strategy from the contract, there is likely to be an extensive legal process that could affect Mohan Electronics, especially if the two external parties move against Mohan Electronics over a breach of contract.
Canceling existing contracts could also potentially have legal ramifications for Mohan Electronics beyond their engagements with Securigard Ltd and OfficeKleen Ltd. As a manufacturer, importer, and distributor, Mohan is likely to have many existing contracts with different parties, including employees and suppliers. Their decision to cancel some of their contracts prematurely and as part of a restructuring is likely to raise concerns over Mohan’s long-term financial and legal probity and fidelity to agreements made in good faith (Claussen, 2020).
In particular, other firms in contract with Mohan are likely to want to renegotiate their existing contracts to protect themselves should Mohan want to cancel additional contracts as part of this or future restructuring programs. Thus, Mohan Electronic’s legal team is likely to have a hard time negotiating future contracts, especially in terms of dealing with breaches and premature cancellations. Markedly, Mohan often utilizes the services of an agency to obtain temporary staff during peak periods, and therefore, there is a need to maintain a positive reputation for honoring contracts with partners.
One more legal issue that could arise from the outsourcing operations is that Mohan’s Electronics workers could institute proceedings against the move to cancel the contracts. Especially, the NAEEW is likely to argue that the cancellation of the outsourced services should be accompanied by commensurate employment of additional, specialized workers by Mohan Electronics. Notably, this is likely to undercut any savings that Mohan makes by canceling the contracts. Moreover, the contract with Securigard Ltd involves a sensitive and specialized function that cannot simply be transferred back ‘in-house’ without compromising the welfare of employees.
Thus, the NAEEW would have legal grounds against Mohan Electronics for jeopardizing workers’ physical safety as they manage valuable company inventory. Additionally, the cleaning services, while being handled by the specialized firm OfficeKleen Ltd, may be considered “precarious employment” as long as they are non-standard and considered below the average employment in terms of social prestige and remuneration (Keune & Pedaci, 2019).
As a result, the existing workers of Mohan Electronics are unlikely to want to take up such roles. For instance, a clerk is unlikely to accept an additional role as a window cleaner in the warehouse. Thus, Mohan Electronics should tread carefully concerning the NAEEW and workers voicing their displeasure and possibly taking legal action against the move to cancel outsourcing agreements.
From an employee relations perspective, the workers are likely to be severely displeased with Mohan’s actions. Firstly, employees need to feel that the working environment is secure, neat, and organized. Canceling the contracts severely undermines the working environment as non-specialized workers are unlikely to carry out the required tasks with the same efficiency.
Secondly, moving the services’ in-house’ is potentially going to upset the employees who will be required to carry out the formerly outsourced workers. Du Toit and Heinecken (2021) note that individuals desire to have a distanced relationship between themselves and the persons who offer services such as cleaning and other domestic help. As such, transferring such work ‘in-house’ is likely to create a new and unwanted dynamic within the workforce. If it implements this option, Mohan Electronics is likely to be viewed as a callous and insensitive employer that does not recognize the humanistic needs of its workers.
Option Four: Terminating the Contracts of All Employees, with a Reduced Number being Re-Engaged on Less Costly Terms and Conditions
This is likely to be the most tasking option for the legal team at Mohan Electronics. Firstly, the reduced number of employees to be re-engaged on less costly terms and conditions is likely to be viewed very negatively by the NAEEW, which is highly likely to file proceedings against Mohan Electronics. To start with, the reduced number of workers would reasonably have to carry out more work, especially considering that Mohan Electronics has reported labor shortages. In particular, if workers are currently paid an hourly rate, there would be no reasonable grounds to lessen the wage rate while increasing their workload, and this could be contested in court.
Moreover, the reduction in their pay is likely to have a ceiling that is the national minimum wage rate. NAEEW is unlikely to accept a situation where their workers at Mohan Electronics are paid below the national minimum wage. Unions are expected to be part of the policy-making process concerning industrial standards. In this case, the NAEEW is likely to have agreements with employers regarding an average wage rate acceptable for workers. The NAEEW could call for a strike or go slow against Mohan Electronics to ensure their demands are met. Mohan Electronics must consider the position of NAEEW regarding worker remuneration and align themselves accordingly before proposing any revised terms.
Terminating all employee contracts is likely to have various legal and temporal implications. On the legal side, some of the employee contracts may have severance clauses, notice of contract termination requirements, and even a need for the employer to prove the need for termination. In cases where the employee is unionized with NAEEW, the union must be informed of this proposal beforehand and must assent to its implementation (Aspan, 2021).
Thus, contract termination may require extensive consultations between Mohan and each employee before being implemented. This brings into play the time aspect of this proposal since Mohan Electronics is looking to solve its short and immediate-term operational concerns. Mohan’s legal team may, therefore, have to make important decisions within a limited period to achieve the larger organizational goal of a timely restructuring.
In the UK, the Trade Union and Labor Relations Act of 1974 details the legal process that should be followed in the case of dismissals. Brodie (2020) notes that the act seeks to protect employees from dismissal, including where they have been constructively dismissed, whereby they resigned due to an action of the employer. Moreover, unfair dismissal proceedings against an employer place them under intense legal scrutiny. By dismissing a third of the workforce, Mohan Electronics could potentially be subjected to a rigorous examination of its past employee relations.
Since Mohan is likely to cite the need to reduce its expenditure at a time when the business environment is unfavorable, there is likely to be an inquest into its financials. In particular, it must be ascertained that Mohan’s decision is warranted for the sake of maintaining Mohan’s status as a going concern. Moreover, the actions taken by firms in the same industry as Mohan will be analyzed and compared to Mohan’s actions. Such inquests are rarely positive for a firm as they place it under increased attention from the public and partners and may affect employee focus.
There is a legal precedent for employees winning wrongful dismissal suits against their employers in the UK. In Argos Ltd v Kuldo (2020), the Deputy Judge of the High Court, Gavin Mansfield, found that the employer, Argos Ltd, had constructively dismissed an employee, Ms. Kuldo. In particular, Ms Kuldo was offered a new role following a restructuring that saw her previous role rendered redundant. Ms. Kuldo rejected the new role, resigned from the company, and instituted proceedings against them, claiming constructive and wrongful dismissal. She also claimed a redundancy package from Argos Ltd.
This case highlights one possible legal outcome that would arise for Mohan Electronics if it decided to implement this option. The dismissed employees could cite wrongful dismissal and start legal proceedings against Mohan. Whether the outcome of the case would be favorable or unfavorable for Mohan is secondary to the fact that Mohan would have to devote its time and resources to a legal battle at a time when it should be cutting costs to secure its perpetual existence.
One potential outcome that Mohan must be prepared for is certain workers refusing to be part of the proposed agreement. In particular, workers and managers are likely to demand that their termination be final and accompanied by the severance pay stated in their contract. Where the contracts do not have a severance clause, the employer and employee’s representative, such as the union, must agree to the amount the employee should receive. In such a case, employment acts such as the Fair Work Act of 2009 would fully protect the employee’s decision (Walpole, Kimberley, and McCrystal, 2020). Thus, Mohan Electronic’s legal team must consider the possibility of being backed into a corner by employees and the potential financial costs such an event would incur for the organization.
As stated earlier, the decision to terminate certain contracts while retaining others is likely to raise serious concerns. Notably, the Fair Work Act of 2009 restricts employers from terminating workers’ contracts and requiring them to apply for work as part of a corporate restructure (Walpole, Kimberley, and McCrystal, 2020). Regardless, the criteria for the dismissal and re-engagement of certain workers must be very clear and beyond legal or moral reproach. Wrongful dismissal suits against an employer can sometimes result in the court ordering compensation for the claimant. Wrongful dismissal on the grounds of discrimination could potentially ruin the reputation of Mohan Electronics as an organization and may result in the firm being required to pay significant punitive damages in civil court.
From an employee relations perspective, the decision to cancel all existing contracts and replace them with less lucrative ones is likely to have both short-term and long-term adverse repercussions. In the short term, the employees are likely to be severely demotivated. In particular, workers are primarily motivated by two factors, namely remuneration and the possibility of career and professional advancement. Lowering wages is likely to result in disinterested workers with a low level of job satisfaction, job performance, and organizational loyalty.
Most of the workers taking up the new terms are likely to be exploring other possibilities as far as employment. In the long term, Mohan Electronics is likely to experience a high employee turnover as workers seek other terms elsewhere and are replaced by new, less experienced workers who are willing to accept the new terms. As a result, Mohan Electronic’s operations, in the long run, are likely to face discontinuity, ultimately affecting Mohan’s performance.
Moreover, introducing lower terms of employment is likely to affect Mohan’s ability to recruit competitively. Notably, the NAEEW is likely to have set benchmarks for the remuneration of its workforce. Firms that want to attract the best minds in the electronics industry should reasonably pay more than the industry standard. Mohan risks having a poor standing within its industry if it adopts a model where it pays less than the industry standard. Recruiting poorly qualified employees could, over time, lead to operational failures and losses, which must also be considered before undertaking this decision.
Evaluation of the Likelihood of a Successful Outcome for the Company of Alternative Courses of Action
Mohan Electronics must avoid laying off workers and having legal battles with the NAEEW. Therefore, this is the best option for Mohan Electronics under the prevailing circumstances. In particular, the plan to have certain staff work from home temporarily can reduce Mohan Electronics’ operating costs. While WFH programs have several disadvantages, they also have features that would benefit the employees of Mohan Electronics. This is the only proposal that does not involve a severely adverse outcome for workers, such as decreased pay and poorer working conditions while affording Mohan Electronics some financial savings. It is, therefore, likely to be acceptable to the NAEEW and has gained a largely positive reputation where it has been employed, especially during the COVID-19 pandemic.
Considering the legal ramifications of this decision and the time factor, option four is the least likely to be the least successful choice. Firstly, it may result in lawsuits that consume time and resources when the organization struggles financially. Second, the option could spark a long-drawn-out legal battle with the NAEEW, leading to go-slows, strikes, and other forms of industrial action against the company. Moreover, the proposal will likely result in adverse publicity for Mohan and, consequently, a loss of standing within the industry. This evaluation recommends that Mohan discard this option and pursue option one. Mohan Electronics would be well advised not to implement this proposal.
Conclusion
In conclusion, Mohan Electronics should adopt the first option as it results in the least adversarial outcomes for its employees. Implementing a WFH program could result in certain workers feeling more enthused about their roles as they perform them in their home environment. Moreover, this can be viewed as a temporary solution that can be reversed if normalcy returns in the business environment. Closing one warehouse could also reduce the firm’s operating costs. While it will result in setbacks during the redeployment of staff, it is a better action than implementing redundancies.
Mohan must avoid costly legal battles, especially against the NAEEW. Additionally, while restructuring is necessary, the firm must avoid alienating its employees from the organization by appearing to malign their interests and only prioritizing the bottom line. Redundancies are likely to result in the firm losing its public reputation and possibly pursuing civil suits whose outcomes are not in the firm’s control.
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