INSIGHT
During 2023, a venture capital company with offices in the UK, Europe and the U.S. engaged in a restructuring that resulted in termination of a significant percentage of its employees. Shortly after the terminations, the company hired several new employees.
It can be a challenge for companies to hire new employees while in the midst of or shortly after a restructuring that has resulted in employee terminations. In order to defend any legal challenges by employees who have been terminated, it is helpful for such companies to show that:
- the new hires are not direct replacements for the employees who have been terminated
- it was business-critical to make the hires during or shortly after the downsizing, and
- none of the employees terminated from other positions would have met the requirements for the new jobs.
The best way to defend such a claim is to have a robust selection process to determine which individuals will be terminated under the restructuring. In addition, job descriptions are helpful for both the positions subject to restructuring and the positions into which the new employees are hired. The timing of the hiring is also a critical component to a successful defence.
This issue needs to be handled with care. Quarmans is available to assist companies with such reorganization planning.
Schedule a consultation here we look forward to hearing from you.
