Bob has been running his own business for years. Some of his staff have been with him since he was working out of his Dad’s garage 20 years ago.
Pete has been with him for 19 years, he joined when they moved to their first proper factory. Pete never had a written contract and has covered all sorts of roles over the years. He is paid slightly differently to the other staff to recognise his seniority and experience.
Bob is very good at bringing in business and running the factory. He tries to keep up to date with HR; he chats to his staff when he has time and expects them to let him know if they have any issues or need training or other support. He communicates policy by memo as and when he has something important to say.
Pete has started to be unreliable; he is often late; has failed to turn up for agreed overtime. Bob considers taking disciplinary action about the poor time keeping but he has a long history with Pete and hopes the problem will sort itself out.
Pete raises a grievance about his pay. He has consulted a solicitor who has told him, among other things, that he is entitled to a written contract and should not have money deducted from his wages without it being in that contract or his written permission.
Bob holds a grievance meeting and says he will provide a contract. They discuss the issue of pay and come to an arrangement about the disputed amounts. Pete says he would like more overtime; Bob says they can’t give him overtime if they can’t rely on him to turn up as they have to pay a manager to provide Health and Safety cover. Pete agrees that if he does not turn up the cost of the manager’s lost time will be deducted from his wages.
Matters do not improve, Pete fails continues to be late and does not turn up to agreed overtime. Bob deducts the management costs of covering overtime from Pete’s wages and Pete then complains about this deduction. Bob does not find the time to organise a written contract. Pete comes in one day and shouts at the payroll manager who, frustrated about the repeated absences and difficulties caused by Pete, loses his temper and says if it were up to him Pete would be out.
The next day Bob gets a letter from Pete’s solicitor saying that he is resigning and claiming constructive unfair dismissal.
Bob decides that he needs employment advice and calls us. We explained that:
- Bob can only deduct money from Pete’s wages if there is the provision for this in a written contract or Pete agrees in writing to the deduction, Pete could make a claim to an Employment Tribunal (ET) for unlawful deduction of wages;
- Although verbal contracts can exist and are valid, the law says that employees should be given a written contract within 2 months of starting work, Pete could not make a claim on its own in this regard but if he makes a claim for something else in the ET he could win additional compensation for the lack of a written contract;
- The Payroll manager’s comment might be used by Pete as a demonstration that the company had decided to get rid of him before following the proper disciplinary process.
- Pete was using the above 3 points to argue constructive unfair dismissal. He claimed that the company had committed a serious breach of his employment contract that was so serious that it went to the heart of the contract and entitled him to treat the contract as at an end.
We settled the case for an economic amount and devised a plan to stop a similar thing happening again so that Bob could concentrate on running his business. The plan included:
- Drafting contracts for all staff and providing easy to use templates for Bob to use for new joiners;
- Ensuring the contract provided for deduction of wages owed to the company;
- Drafting a staff handbook that included the ad hoc policies Bob had communicated by memo over the years;
- Providing training to Bob and his managers on running an appraisal system and disciplinary and grievance procedures
Bob now picks up the phone or emails for advice when he has an HR question. We get back to him the same day with concise, easy to follow advice and any letters or documents he needs. Putting in place the appraisal system headed off a couple of issues that might have become grievances and made his staff feel that the company cared about their development and progress.