Employment Matters January 2007

Cultural Change in the Workplace

As football fans will be aware, Sheikh Mohammed, through his Dubai International Capital (DIC) Investment Group, has engaged in takeover negotiations for Liverpool FC in a potential multi-million pound deal. This follows a sequence of high-profile takeovers of football clubs including Chelsea, Manchester United and West Ham United.

Naturally a takeover has massive implications for the clubs involved, particularly in terms of finances available for assets such as new players or stadia.

But what impact do these takeovers have on the employees of these clubs, or indeed any other company or entity which is taken over by an outside investor?

Can these new owners easily stamp their own way of working and identity on their new business or will they be constricted by employment legislation?

What is the best way for companies to deal with cultural diffences?

Cultural changes

The new owners of a business may find themselves able to make certain limited changes to enable their new business to fit in with their working style, without making any material contractual changes that could lead to tribunal action.

For instance, the new owners may have decided that the business they have bought is underachieving. Restrictions on e-mail and telephone use, higher performance targets and more frequent and comprehensive appraisals, are all measures a new owner could bring in to attempt to improve performance.

All these aspects are usually non-contractual and therefore if a new owner goes about making such changes in the right way, (ie by introducing them in a suitable, sensitive, and consultative manner) then they should be able to make such changes with little or no opposition.

However, even where no contractual changes are involved, owners should still be aware of the risk of breaching the so-called “mutual obligation” between employer and employee of trust and confidence. This is the obligation not (without good reason) to treat the other unreasonably. For example, by imposing unnecessarily strict changes (such as an unrealistically high performance target) and risking employees resigning and bringing constructive dismissal claims.

It is also true that owners who purchase a business, whose employees are protected by the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE), will have stronger protection against non-contractual changes. This will be dealt with in more detail in the TUPE section below.