Has empathy become redundant? – our take on Better.com’s recent dismissal decision

On 1 December Vishal Garg, chief executive of US mortgage firm Better.com surprised 900 staff by dismissing them with immediate effect on a group video call. A recording of the call went viral, prompting global criticism of Garg's abrupt and insensitive approach.

Whilst employment law is very different in the US, Garg's call shows how, even if you can do it legally, a poorly handled redundancy process can backfire spectacularly.  Consumers have been leaving negative reviews on Better.com's Trustpilot page,  executives are rumoured to be leaving in the wake of the incident, and the company's plans to go public through an IPO have been delayed. With very unfortunate irony, it is rumoured the company's equality and diversity team were among those dismissed, causing yet more embarrassment. Allegations of Garg's previous misdemeanours have resurfaced including an email he was alleged to have sent to staff in 2020 accusing them of being "a bunch of DUMB DOLPHINS". Remaining Better.com staff are understandably uneasy, prompting Garg to write a letter of apology admitting to staff "I embarrassed you".  Better.com is now synonymous worldwide with insensitive leadership.

Can you lay off staff with immediate effect?

Better.com is a US company and we don’t know where the impacted staff were located. If any employees were based in the UK then they would be subject to UK employment laws governing redundancy and unfair dismissal.

In the UK, making a group of staff redundant immediately comes with significant financial and reputational risk.  

For a dismissal to be fair in the UK employers must show that the dismissal was for a fair reason and a fair process was followed. Redundancy is potentially a fair reason, and the employer must show that there is a genuine redundancy and that it consulted with staff, selected in a fair way and explored alternatives to dismissal, such as redeployment to another role. If a dismissal was made without a fair reason or procedure, then employees can bring a claim for unfair dismissal and be awarded compensation (or, very rarely, gain an order requiring them to be reinstated or reengaged by their old employer). There are additional steps (mainly linked to consultation with employee representatives for a minimum period) that the employer must follow if it is looking to collectively dismiss 20 or more staff within a short space of time.

There is scope for employers to be commercial. The right to claim unfair dismissal only applies to employees that have more than two years' continuous service. And compensatory awards for unfair dismissal claims are subject to a statutory cap on compensation (the lower of 52 weeks gross pay or £89,493). Those with deeper pockets may try to anticipate or prevent claims in the Employment Tribunal by paying members of staff through a settlement process allowing those employers to lay off staff much more quickly with limited consultation.

But should you lay off staff with immediate effect?

Just because it is possible to lay staff off without following a process, doesn’t meant that it should be done. Employers should bear in mind that it is not only about money (for the employees or the business whose brand might nosedive). The Better.com incident is a timely reminder of this. It shows that employers must weigh up more than financial costs and benefits when managing their workforce.

Investors, regulators and consumers alike are increasingly aware of ESG issues (environmental, social and governance) and are being proactive when companies and brands do not share their values. Many companies are operating in a challenging recruitment market with company culture a key factor in candidates' decision making.  

In some crisis situations speed may be of the essence and outweigh any other considerations, or it might well suit the employees affected, but in most redundancy situations it pays to do things the right way and follow a proper process. Even if a quick, commercial approach is required, employees should still be treated with dignity and respect, as the reputational damage for not doing so can be far reaching.

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