19th March 2020 ❘

How lay-offs and short time working may at least help the health of your business

This bulletin is designed to provide all clients of Burnetts with reassurance and information about what we can do to help in addressing employment issues arising from the COVID-19 crisis.

We are here for you

The first thing to emphasise is that the Employment and HR Team remains open for business and contactable in the normal way. We have invested heavily in the past two years on the technology required for agile working outside of the office leaving us well placed to service clients despite any social isolation restrictions on office attendance. We are here to help you in the same way as we always have been if you need us!

Keeping up to date

The most immediate requirement for all employers is to get the most up to date information on COVID-19 itself. The Government is doing all that it can to provide such information in as clear a way as possible but, inevitably, there will be some nuance or aspect of detail which is not covered. That is where we can help and you should not be afraid to contact us. It may very well be that another client has already asked us the same question which we have already researched and that we can provide you with a swift reply.

In terms of working practices and the potential effect of the COVID-19 on employment related issues, the most up to date sources of information remain the online advice issued by the Government, from ACAS and from the various industry specific professional bodies. Once again, good as that advice is, it can’t cover every aspect of the infinite variety of situations which might apply to your work situation. Don’t be afraid to ask us for help about your work situation and if you need clarification or advice.

The lessons from the world banking crisis 2008

Without a doubt, the world of work finds itself in an extremely difficult place. The situation is, however, not entirely without parallel. One only has to look back to the recent past and the banking meltdown of 2008 when the financial world was on the brink of economic collapse. The problems which employers faced then and the lessons learned will be useful in addressing present and future needs.

The current economic crisis

The most pressing concern faced by virtually every employer in the present situation is how to ensure the economic viability of the business faced by a reduced demand for goods or services. This inevitably means asking the question: what can I do about my workforce during this period of turbulence?

The first step is to consider all possible options short of making redundancies. Let’s look at these in a little more detail.

Precursor to looking at options

We cannot emphasis enough that the starting point has to be the contract of employment and the absolute necessity to act in accordance with what it contains (or in some cases fails to contain). So, get hold of the relevant contract of employment as soon as possible and read it.

Practical measures

There are important practical considerations which should be considered as a first step. These include putting a hold on recruitment and possibly withdrawing job offers made to new applicants. If the job offer has already been accepted then withdrawing the job offer will require payment for the appropriate notice period. It will be important, however, that the reason for withdrawal is clearly explained by reference to economic circumstances and is not tainted by any element of potential discrimination (e.g. age, sex, disability etc). If there is any such taint then the rejected employee can bring a claim. Other options will include considering the deferment of new starters. If a start date has already been agreed then, generally speaking, this will normally require the agreement of the new starter to a new start date.

Non employees

Historically, when looking to a reduction in head count, employers have looked first at agency and other casual or temporary staff. These categories of workers have, however, acquired rights in recent years and so their status and particular rights need to be carefully considered and clearly identified in each case before any decisions are made. Increasingly, employment tribunals are making decisions that people thought to be self-employed are in fact employees attracting employment rights. It is also the case, broadly speaking, that the protection of anti-discrimination legislation extends to more than just employees.

Lay-offs and short-time

The most common measures to be considered by employers during periods of economic difficulty are lay-offs or some other form of short-time working. These are also more attractive to employees as the employment relationship continues in being and jobs are not lost.

As was said earlier, the first port of call before doing anything else is to look at the contract of employment. There is no right for an employer to lay off unless this is permitted in the contract and the same applies to reducing hours and pay for those reduced hours. If there is nothing in the contract then the employer needs to reach agreement over such matters with the employees. This may not be as difficult as feared. In difficult economic situations, most employees and their unions recognise the realities and are prepared to agree some form of transitional measures until matters improve.

Importantly, lay-offs can’t be used indefinitely. Broadly speaking, where an employee has the requisite length of service and has been laid off for four or more consecutive weeks or a total of six weeks in any period of thirteen weeks, and has received no pay during those weeks, an employee has a statutory right to serve a written notice entitling the employee to a redundancy payment. The employer can contest such a notice but only has a limited defence.

The considerations in relation to short-time working are broadly similar to those which apply to lays offs. In the case of short-time working, an employee arguing redundancy needs to show that for the relevant weeks they have been paid less than half their normal remuneration.

The procedural requirements for serving notice by the employee and the response of the employer are quite technical. There are also a myriad of considerations as to the practical consequences of lay-offs and short-time working, for example: what happens to pension contributions and holiday entitlement during lay off; or, how are statutory redundancy payments to be calculated for these purposes? These are not insurmountable and with patience and our guidance these can be safely negotiated.

Finally, under this heading, employers need to be mindful that in certain circumstances an employee may be entitled to a statutory guarantee payment for up to five workless days in a three-month period. This right is not dependent on there being a situation of lay off or short time working. Again, if necessary, we can talk you through this.

Consultation

Proper and timely consultation with employees and/or unions is normally a measure of good practice and often a requirement under existing employment legislation. This is even more true of the present situation with COVID-19 where there is undoubtedly a greater shared acceptance of the difficulties facing employers. It may well be that employees and unions will be prepared to agree temporary variations to contracts of employment to ride out the present crisis where continued employment, albeit on reduced terms, is seen as an acceptable price to pay for longer term security of employment.

Redundancy

It may turn out that the interventionist measures outlined above will not be enough for some employers who will, unfortunately, need to consider making compulsory redundancies. In that event, the normal considerations for making fair redundancy decisions following normal redundancy procedures need to be followed. COVID-19 will not absolve an employer from needing to follow these.

This Note provides guidance in general terms and must not be relied upon as being either comprehensive or definitive of the law. Each situation must be considered in the context of its own individual circumstances and the detailed legal provisions which might apply. To that end, you are advised to seek appropriate and specific legal advice before acting in respect of each such situation.