Tackling Changes to Reporting Lines

With businesses appearing to be facing increasingly difficult trading conditions, it is not uncommon for employers to look at making changes to reporting lines as a means of improving performance. This is particularly the case when a company has a new CEO.

However, employees can be sensitive about changes in reporting lines, especially where it entails losing reports or having to report in to someone who they perceive as being less senior or important than their current line manager. We Brits are internationally known for our obsession with hierarchy, and the workplace is no exception to this.

The ability to change reporting lines

Employee relations issues aside, the flexibility with which an employer can unilaterally impose a change in reporting lines depends on two key issues.

The first thing that needs to be considered is whether the employer has the contractual right to implement the changes it wishes to make. For example, if an employee’s job title is executive assistant to the CEO, it will be difficult for the employer to argue it has the right to require the employee to report in to someone else. On the other hand, if, for example, an employment contract provides that the employee is employed as a sales director, the employer may be better placed to argue that, provided the employee continues working as a sales director, it will not breach the employment contract by changing their reporting line, either in terms of who manages them or who they manage. Generally, if an employment contract provides the employer with greater flexibility on duties and reporting lines, it is likely to be in a stronger position when it comes to imposing changes in reporting lines.

The second issue is whether the proposed change breaches the implied term of mutual trust and confidence, and thus gives rise to a claim for constructive dismissal. The test is whether the employer has, without reasonable and proper cause, conducted itself in a manner that is likely to destroy, or seriously damage, the relationship of trust and confidence between itself and its employees. Consequently, when considering this issue, it's important to assess the nature of the changes and the manner in which they are effected.

The nature of the proposed changes

The impact of the proposed change to reporting line will be of crucial importance, both in terms of reducing the risk of claims and maintaining good employee relations.

If the employee’s salary and job title will remain the same, but the employer wishes to insert an additional reporting line above them, or remove some of their reports, the employee will probably find it difficult to successfully argue that the employer’s actions amount to a breach of the express terms of their employment contract, or a breach of the implied duty of trust and confidence. Ultimately, unless the employee is contractually entitled to their reporting line, the core terms of the role will remain fundamentally the same and the employee will not have suffered any discernible loss, apart from possibly a minor perceived reduction in their status.

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Where there is a significant change in reporting, such as where an employee loses an entire team reporting in to them, they may have a stronger case for arguing this is a breach of the implied duty of trust and confidence, or possibly breach of contract if the change is inconsistent with their employment contract. However, in reality, most employees will reluctantly accept such a change, provided this does not impact on their title or remuneration.

How an employer can implement a change to reporting lines

If an employment contract indicates that the employer cannot unilaterally impose a change in reporting line on the employee (for example because their job title expressly relates to reporting to a particular role), the employer will need to obtain the employee’s consent to the change. This should include meeting with the employee to explain the underlying business reasons for the proposed change and dealing with any issues raised as part of the consultation process, which is likely to take a couple of weeks. In the event that the employee refuses to agree to the change, the employer could potentially dismiss them and offer them employment under the new terms. However, this is generally seen as a last resort and can be a risky step to take as it is likely to upset the employee further. Indeed, employers are advised to take legal advice before pursuing this course of action.

If the contract does not prevent the proposed change being imposed, it is still good practice to consult with the employee about the proposed change before implementing it, as set out above. This will make it harder for the employee to argue that the employer has breached the implied term of mutual trust and confidence. It should also help to protect the relationship between the parties, and therefore reduce the risk of a claim.

What can an employee do if they are unhappy about a proposed change in reporting line?

If an employee is unhappy about a change in reporting line, they may wish to raise a grievance about it either before or after it is implemented. The employee can also complain that they are working under protest and do not accept the proposed change.

Should the employee remain unhappy with the change imposed on them, or if they are dismissed and offered re-employment, they may seek to bring a claim for breach of contract and unfair dismissal. Unless there is a reduction in salary, however, there is no clear claim for damages based on a breach of contract.

An unfair dismissal claim is currently capped at the lesser of a year’s pay and £78,962. However, an employee seeking damages for unfair dismissal must show that they have sought to mitigate their losses. If the employer offers to re-employ the employee based on the new reporting line and maintain their salary, but the employee turns down the offer, an employment tribunal may find that the employee has not adequately mitigated their losses and award them no compensation. Consequently, employees rarely bring an employment tribunal claim based on a change in reporting lines. This means the greater, more immediate risk, is a breakdown in employee relations.

Ultimately, there is little point in changing reporting lines to improve the business if it ends up alienating the workforce. As is often the case, good communication with employees is key to successfully implementing changes.

About the author

Michelle Last is a consultant solicitor at Keystone Law, specialising in employment law. She is a regular contributor to the press and has been published in The Times, The Financial Times, The Sunday Times, HR Director and Personnel Today, among other titles. Last is frequently ranked as the “most viewed” employment law solicitor and regarded as a “thought leader” on LinkedIn.

An unfair dismissal claim is currently capped at the lesser of a year’s pay and £78,962. However, an employee seeking damages for unfair dismissal must show that they have sought to mitigate their losses. If the employer offers to re-employ the employee based on the new reporting line and maintain their salary, but the employee turns down the offer, an employment tribunal may find that the employee has not adequately mitigated their losses and award them no compensation. Consequently, employees rarely bring an employment tribunal claim based on a change in reporting lines. This means the greater, more immediate risk, is a breakdown in employee relations.

Ultimately, there is little point in changing reporting lines to improve the business if it ends up alienating the workforce. As is often the case, good communication with employees is key to successfully implementing changes.