Navigating Employee Termination for Consulting Firms

The decision to terminate an employee’s contract of employment can be a difficult landscape to navigate for employers. For consulting firms, this may require careful planning, clear communication, and a focus on minimising disruption to client relationships and ongoing projects. This article highlights key legal considerations for firms operating in the consulting industry when navigating employee termination. 

Contractual and Statutory Obligations 

Reviewing the employee’s contract of employment, applicable policies and associated agreements carefully should be the starting point for navigating employee termination. These crucial documents outline the contractual rights and obligations that fall on you and will dictate:

• termination provisions;
• notice periods;
• severance requirements; 
• disciplinary and grievance procedures; and
• post-termination rights and obligations such as non-compete and non-solicitation clauses.

Beyond contractual obligations, you should be aware of statutory obligations such as: 

• ensuring any accrued but untaken holiday is paid on termination of employment;
• outstanding statutory sick pay and leave entitlements;
• redundancy pay;
• unfair dismissal; and
• discrimination. 

Careful planning and liaising with your accountant or accounts department to ensure accurate payments are issued on termination of employment is critical. You will also need to ensure you follow a fair procedure in accordance with your internal company procedures, law and ACAS guidelines. 

Reducing the Risk of Potential Litigation 

Where an employment relationship has continued for 2 years or more, failure to follow a fair procedure and provide a statutory fair reason for dismissal could result in a finding of unfair dismissal. It is therefore important to set out clear reasons for termination in writing and ensure your reason falls within one of the following five statutory fair reasons:

• capability and qualifications; 
• conduct;
• statutory illegality;
• redundancy; and  
• some other substantial reason. 

Whether a decision to dismiss an employee on the above-mentioned grounds is a question that an employment tribunal will consider, given the resources and evidence available to an employer. As such, the ultimate test is whether the decision is within the range of reasonable responses.

New Employee or Recent Hire

The above considerations mainly apply to employees with two years or more of continuous service. However, just because an employee has less than two years of continuous service does not mean there are no legal risks. You could still be subject to the following claims:  

• discrimination;
• wrongful dismissal; and 
• breach of contract. 

As such, assessing your reason for termination in both contexts and ensuring you follow a fair procedure is crucial to protecting your interests and reducing the level of disruption to your business. 

Consider Post-Termination Rights and Obligations

To minimise potential disruption to your clients, ongoing projects, and your existing workforce, reminding terminated members of their contractual obligations that persist beyond the employment relationship is crucial. 

Carefully review your existing employment agreements to determine whether you are protected by the following restrictive ‘covenants’ or clauses:

• non-compete;
• non-solicitation; 
• non-poaching; and
• confidentiality. 

As a consulting firm, whose business and bottom line heavily depend on reputation, referrals and repeat business, the highlighted restrictive clauses can be particularly useful towards ensuring your valuable contacts, clients and employees are protected. Likewise, ensuring you have a robust confidentiality provision ensures the protection of sensitive company data.

Key Takeaways

Navigating employee termination as a consulting firm requires careful planning in order to reduce the risk of potential litigation and reputational damage. To reduce risk ensure you: 

1. carefully consider the applicable contractual and statutory obligations; 
2. follow a fair procedure; and 
3. consider protecting your interests post-termination. 

If your consulting firm is terminating employees, our experienced employment lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. So call us today on 0808 196 8584 or visit our membership page.

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