Laid off or 'managed out'?

IN 2018 and 2019, Kate (not her real name) received glowing annual workplace appraisals which stressed how she repeatedly "went the extra mile", "integrated well" into her role and demonstrated leadership in her various duties. For her performance, she also received a bonus of about 3 months' salary for each year. Things took a drastic turn in 2020, she tells The Business Times. Her annual performance assessment in April last year called her a "misfit" in her role at the company and claimed business stakeholders were frustrated with her shortcomings.

In July, Kate was told she was one of the poor performers at the company. She was offered a choice between being placed on a 3-month performance improvement plan (PIP) which could ultimately result in termination if her performance did not improve within that period, or to resign with a lump sum payment amounting to 3 months' base pay and access to the company's outplacement services.

"The word retrenchment was never used, it was an agreement to resign," she says. "I spent close to 3 years in (the company), but was never informed of any poor performance or problems before this."

Today, she is still struggling to find a job. "I'm no longer young, and it's harder for me to start again at another company. I'm not sure how quickly I will be able to be employed again," she says, adding that "age discrimination" was one of the problems she encountered during her year-long job hunt.

As the Covid-19 pandemic forces companies to scale back costs, employment is one mammoth expense that employers grapple with, says Ramesh Bharani Nagaratnam, managing director of RBN Chambers.

"Two of the factors which weigh down profitability for companies are rental and staff costs," says Nagaratnam. In his view, staff costs are "a lot easier for companies to manage", partly because not everyone goes to government authorities or unions if they feel they have been marginalised. "People just sort of want to get on with life, unless big money is at stake," he says.

The pandemic squeeze on revenues and profits has forced companies to tighten their belts. It has also made employment-related issues more complicated, as there is no clear winner between profit-driven companies and their employees. In that David versus Goliath type of clash, how does one ensure that a fair fight takes place?

Employment issues on the rise

Companies across Singapore have been streamlining operations due to the pandemic. Industries that have been hit the hardest - including aviation, retail and food and beverage (F&B) - have been forced to make staff cuts amid cost pressures. In turn, some law firms have noticed more people heading their way for advice on employment-related issues.

IRB Law partner Muntaz Zainuddin says she has noticed a "rising number of cases where employees call out wrongful dismissal". This trend began last year, she notes.

She estimates that about 60 per cent of these dismissals saw employees allege that companies refused to adhere to guidelines from the Ministry of Manpower (MOM) on retrenchment benefits, but simply provided contractual notice.

Another common allegation from employees was that companies were forcing resignations through "constructive dismissal", or terminating employees for unproven reasons.

Says Zainuddin: "It seems possible that companies are having difficulty retaining their employees and are finding ways to terminate the employment relationship to save costs.

"It is also possible that Covid-19 and its impact on the economy is a contributing factor as companies cut their workforce due to business shrinkage or inability to operate normally."

RBN's Nagaratnam notes that prior to the virus outbreak, employees were generally "very reluctant" to pursue anything employment-related, even if they felt they had a "really good case to argue".

However, the firm saw an uptick in employment-related inquiries starting from July last year, from employees who were looking to consult lawyers to find out more about their rights. He recalls attending to as many as 3 to 4 employment-related cases in just 1 week.

Chong Xin Yi, a senior lawyer at Gloria James-Civetta & Co, notes a rising number of cases alleging wrongful dismissal. This was especially so among "higher level employees".

Work performance-related issues aside, factors such as a change of leadership or a clash of personalities could also be reasons behind claims, she adds.

"These differences are typically political with personal undertones, which will not be obvious or documented. Also, by the time an employee reflects on what has been happening, the employee may no longer have access to the systems or documents that may help to prove his/her case," says Chong.

Staff today are also better informed of employment laws and their rights, and are more likely to speak up if they feel that they have been wrongfully or unfairly treated at their workplaces.

Law firm Bird & Bird ATMD partner Goh Seow Hui says that employees today are "less afraid of the stigma or trouble associated with bringing claims against former employers". "The evolution of the employer-employee relationship - the industrial age idea of "master and servant" - has been replaced by the modern relationship where employees can legitimately expect to be treated fairly by employers," says Goh.

An "overload of information" on the Internet regarding workers' rights or employer obligations has also helped open discussions, says RBN's Nagaratnam.

Employers BT spoke to generally referred to retrenchment as a tough or complicated topic that has to be handled with tact and compassion. But there are different ways for companies to reduce headcounts.

Henry Tan, chief executive of accounting firm Nexia TS, says that some benefits of the "managed out" method include a smoother and easier process, and the ability for companies to save on retrenchment payouts. While retrenchment is a "quick and fast" method, it could thrust the company in a negative light, which could adversely affect its reputation. Being upfront with employees is also key, said Tan. "Employers should be transparent in their financial conditions and cost cutting measures."

Toby Koh, managing director of Ademco Security Group, says the topic of retrenchment typically boils down to the mindset of business owners or key management.

"(Employers) may perceive retrenchment as a sign of failure of their business and prefer to manage a staff out on 'performance' issues. Having said that, which leader would want to get rid of good workers? In challenging times, we need the best that we have to fight the battle."

But in tough macroeconomic times, some employers argue that managing out employees could be a more effective way. "Managing out someone is a way of helping an employee to understand that it's in their best interest to leave voluntarily," says Richard Lee, chief executive of Aalst Chocolate. He says that this approach would give employees the chance to find another role without having "the stigma of being terminated".

As a leader, he says one of his priorities is to avoid retrenchment as far as possible - which will help his business pull through the tough times while still retaining its best and brightest employees.

How do you know if you're being managed out?

To protect themselves from being effectively "managed out" from a company, Randstad's Dass says employees need to review their contracts carefully and understand what they are entitled to if they get retrenched. While most companies will pay a severance sum in the case of retrenchment (although they are not currently required by law to do so), employees who are "phased out" of their jobs are not entitled to benefits.

Companies - not only in Singapore - appear to have found new ways of laying off employees, and it could become tougher to keep up with these methods to ensure they are ethical and in line with Singapore's laws.

Jaya Dass, managing director for Singapore and Malaysia at Randstad, says that "managing out" employees is a method that is "normally used by poor management teams to take the easy way out" when reducing their workforce sizes. She says that Singapore however has policies in place to prevent this from happening, or for government authorities to intervene when necessary.

But when the definition of being "managed out" is hazy at best, how can an employee tell if they are being subjected to this tactic?

Kyle Gabriel Peters, a partner at PDLegal, explains that when an employee is "managed out", the process typically stretches over an extended period of time. The grounds for this practice usually include poor work performance, poor job fit or redundancy.

A termination of employment without notice, meanwhile, is immediate and the employer must have established misconduct on the part of the employee after conducting due inquiry. "In substantiated (wrongful dismissal) claims involving "managed out" cases - the employers were assessed to have poorly managed the dismissal process such as failing to properly conduct inquiries as to misconduct or maintaining proper records relating to performance," he said.

S Suressh, a partner at Harry Elias Partnership, notes that in the process, employers "persuade" an employee that it is in the employee's interest to leave. "Rather than the employer terminating the employee, the employee chooses to resign," he says.

One example of being "managed out", says Suressh, is when an employee is given unreasonable targets to achieve and is later appraised to be underperforming when he or she does not achieve those targets. Other examples include being left out of meetings, given unattractive assignments, losing perks such as a private office, or being denied the opportunity to earn commissions when a significant portion of their take home pay constitutes such commissions.

He notes that the phenomenon of being "managed out" is not common in Singapore, where termination of employees is not difficult.

This practice is more prevalent in jurisdictions where dismissing an employee is quite difficult, or in cases where the employee in question has a strong protection in his employment contract against early termination and is guaranteed a generous severance package if terminated.

"Managed out" is usually not unlawful unless it amounts to an unfair "constructive dismissal", he warns. "A constructive dismissal is when an employee can demonstrate that he was forced to resign because of the conduct or omission by the employer. And this is unfair if it can be shown that the termination was discriminatory. Both of these are very high thresholds and are difficult to prove."

To Bird & Bird ATMD's Goh, there is no "material difference" between being managed out and straight up dismissed. "Managed out is just a kinder and more respectful way of putting it," she says.

"In the course of being "managed out", (if) the employee is given a longer notice period and is better prepared for adverse outcomes, it would reduce the risk of litigation."

Clearer definitions, regulations needed

Singapore authorities have tightened their hold over companies and their retrenchment exercises. In September, MOM said that from Nov 1, companies with at least 10 employees will have to notify the ministry each time they retrench any employee. This was a tightening from current regulations which require employers to notify MOM only when they retrench 5 or more employees within a 6-month period.

The revision enables agencies to "better reach out to affected local employees to provide employment and job search support," said MOM.

In response to queries from BT, MOM and the Tripartite Alliance for Fair and Progressive Employment Practices (Tafep) acknowledge that retrenchment is a "difficult time for all involved", particularly for affected staff and their families. Tafep found that in cases to date, the majority of employers understood the need to conduct retrenchment responsibly and have adhered to the Tripartite Advisory on Managing Excess Manpower and Responsible Retrenchment (TAMEM).

Say the MOM and TAFEP spokespersons: "Disputes over retrenchments mostly arose due to poor or delayed communications between the employer and the employees."

Singapore National Employers Federation executive director Sim Gim Guan says that while many businesses have been affected by the pandemic, many are managing their excess manpower responsibly.

He noted that in 2020, nearly 129,000 workers were put on a shorter work week or a temporary layoff, versus 3,600 workers in 2019. "These workers would otherwise have been retrenched," he said.

In the "unfortunate event of a retrenchment", Sim says employers should continue to treat their employees with "dignity and respect". Some things employers can do include providing clear communication of the next steps and helping them find alternative jobs in associate companies or outplacement assistance programmes.

Government authorities are also quick to intervene when they receive adverse feedback.

Tafep follows up with the employer to find out the reasons for the retrenchment and checks that the retrenchment was carried out responsibly and fairly in line with guidelines.

These include ensuring that the selection criteria for retrenchment were applied fairly, consistently and based on objective criteria. There should be no discrimination on grounds of age, race, gender, religion, marital status and family responsibility, or disability, say the authorities.

There are also clear penalties in place for employers who are found to have conducted retrenchment unfairly, including the suspension of work pass privileges.

While companies are now being scrutinised more closely, market watchers say there is room for improvement to safeguard employees.

Severance pay is one point of contention, says Sonia Danani, head of human resources for South-east Asia and India at Michael Page. The amount of compensation offered to employees rests solely on the company's policies, and there is no statutory requirement.

"There may be instances of organisations who choose to offer the baseline compensation to their retrenched employees, versus considering other factors such as liquidity of the company (and the ability) to support affected employees," she says.

Bird & Bird ATMD's Goh says Singapore would probably benefit from a "clearer statutory definition" of redundancy or retrenchment.

The definition of "retrench" in the Employment (Retrenchment Reporting) Notification of 2019 defines the term as terminating the employee's contract of service at the initiative of the employer because of redundancy or any reorganisation of the employer's profession, business, trade or work.

This definition, says Goh, is "not particularly helpful". "Under the current definition, an employer can simply avoid the redundancy label when effecting termination," she says.

"It may be clearer to define 'redundancy' as an event where the termination of employment is wholly or mainly attributable to the employer's intention to cease or diminish the particular business in which the affected employee was employed."

Harry Elias's Suressh cautions that dealing with employment-related issues is a complicated game.

"There are always two tensions," he says. "The individual employee who has certain expectations about how he should be treated, and the employer who feels that he is in the best position to manage the workforce for the profitability and success of the business."