The reputational impact of employment issues on high net worth individuals


Transmission Private, one of the world's leading family and private client communications advisers, has published, what it refers to as, "the UK's first public barometer on attitudes to wealthy people". Strikingly, the survey shows how profoundly the way ultra-high net worth individuals (UHNWIs) treat their employees can impact on their reputation. After paying tax in the UK, the results suggest that this is the most powerful way to sway the general public in favour or against UHNWIs, with 45% of respondents indicating that this is a material sway factor for them. So how can UHNWIs protect their reputations when employing staff?

Prevention is better than cure

 The most effective way to avoid reputational damage is to minimise the risk of disputes by getting the law right.  UHNWIs should ensure they are fully aware of the statutory rights and legal protections that employees and workers (a broad category which covers many individuals who are not employees) enjoy in the UK.

It's important to bear in mind that, subject to a few limited exceptions, employment law applies in its entirety to domestic staff - the fact that they are employed by a family rather than a corporation does not alter their rights.

Both employees and workers have the right to receive national minimum wage, paid holiday and minimum rest breaks, and are protected from discrimination. Employees have a number of additional rights, including the right to minimum notice provisions, statutory sick pay, auto-enrolment and minimum contributions into a pension scheme.

Employees with over two years' service have the right not to be unfairly dismissed, although, in certain circumstances, the two-year rule does not apply (such as if the employee has "blown the whistle" on perceived legal wrongdoing).  As a result employers should proceed with caution even when ending arrangements with staff with less than two years' service. 

Employers also need to consider how they will deal with any grievances raised by employees or any disciplinary matters that may arise – getting the process right can be crucial to avoiding claims.

 Getting it in writing

Employees must be given a written statement of certain terms and conditions of their employment within two months of starting. We can’t stress enough how important it is to get the contractual documents right, as a well drafted employment contract can mitigate the risk of issues further down the line. Confidentiality is likely to be a prime consideration for UHNWIs and it's important to set out from the outset what the expectations are around this, including social media use.

See you in court

It is relatively straightforward and low cost for UK employees to bring claims in the Employment Tribunal if their employer has breached their rights.   Savvy employees of high net worth individuals are likely to use the potential reputational damage of a claim as a threat, in order to obtain a more attractive settlement package or to put pressure on their employer. Decisions of the Employment Tribunal from February 2017 are available on an online database – as such they are public and searchable. Where claims are seen as "newsworthy" they are also likely to attract press attention, and hearings in the Employment Tribunal are generally open to the public.

Where things have gone wrong, or where issues have arisen, employers often seek to use "NDAs" to protect their reputation. However, there is an on-going controversy around the use of NDAs/confidentiality agreements, particularly in the context of #MeToo allegations. High net worth individuals should therefore be very careful not to put undue pressure on staff to enter into these types of agreements. It is also important that they are carefully drafted, so as to avoid a risk that the agreement will be deemed unenforceable. Employers also need to remember that it is not possible to prevent workers from reporting a whistleblowing concern – this will generally be to a relevant regulator but could, in certain circumstances, include reports to the police or the media.

The Transmission Private publication flags how important a consideration employment issues can be for high net worth individuals in the UK; and how costly failures (or perceived failures) to treat employees fairly can be from a reputational perspective. Where in any doubt, we recommend that high net worth individuals take legal advice to ensure that they, their families and their businesses are best protected and least exposed.

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