Employment Update – COVID-19: Short Time Working / Lay-Offs

Employment law concerns continue to arise in connection with the developing outbreak of Coronavirus (COVID-19). The government is prompting employers to be flexible in terms of employee working arrangements at this difficult time.

Many employees up and down the country are already working from home following advice by the UK government. However, following the shut-down of schools, childcare facilities, closure of pubs and bars in an effort to delay the COVID-19 outbreak, there is no doubt an overwhelming sense of pressure upon both employers and employees.

In these unprecedented times, many employers may need to consider temporary lay-off or short-time working as an option.

Jas Dubb, Senior Associate Solicitor in the Employment team at Wilkes considers the prospect of short time working and lay-offs during this period and what effect they may have on both employers and employees.

Coronavirus Job Retention Scheme

The UK government has announced temporary measures implemented to support employers to retain staff during this challenging period even if they are forced to temporarily shut their businesses. This is a momentous development that will impact on decision-making for employers.

The scheme allows the employer to claim a grant of up to 80% of the employees’ wages for all employment costs (including employer National Insurance contributions and minimum auto enrolment pension contributions), up to a cap of £2,500 per month, which would be equivalent to a salary of £30,000 pa. For those who earn over this amount the statutory cap will see a significant reduction in monthly income.

Some guidance for the scheme were published last week, but further details are expected to be announced. You can read the Governments guidance so far here.

Lay-offs and short time working

Every business goes through ups and downs and sometimes there is a need to make temporary cuts to the workforce when there is less work available.

In this case a ‘lay off’ or short-time working may occur. We advise you seek legal advice in respect of this.

What is lay-off?

Lay-off is when an employee is not provided with work (usually without pay) by their employer for at least one working week or longer. It is used as a response to lack of work, and is expected to be temporary in nature. This is used as an alternative to making redundancies.

There is a statutory pay scheme for lay-off and short-time working, but a clause in the employment contract is required in order to implement these temporary measures. It can also be enacted by agreement from both the employer and employee.

Examples of when this might occur include: if a place of work needs to be temporarily closed for office refurbishment or construction works and or lack of work in general.

What is Short-time working?

Short-time working is similar to lay-off, but rather than providing no work, short-time working occurs when the work (and therefore pay) provided to an employee is less than half a week. Reduced pay will trigger the statutory short-time working protection for employees, subject to eligibility requirements.

Contract

For an employer to lay an employee off there must be an express contractual right under their contract of employment. Such an agreement has contractual force only if it is incorporated into the individual employee’s contract of employment.

Custom and Practice

The right to lay off an employee may also be implied if it can be shown that it has been established over a long period of time by custom and/or practice. There must be clear evidence to show that this is customary and has been used over a long period. Relying on implied terms can be quite fraught so legal advice should be taken.

An agreement may be reached by the employer and employee to alter the terms of the contract to allow layoffs/short-time working by mutual agreement. Where the only alternative is redundancy, employees may consent to the temporary reduction in their hours/ pay.

Pay

Employees who are laid off or put on short-time working may be entitled to a statutory guarantee payment from the employer. This is limited to a maximum period of up to five ‘workless’ days in any period of three months.  The daily amount is subject to a limit, which is reviewed annually and currently is £29.00 per day and rises to £30.00 from 6 April 2020. Part-time payments are calculated pro rata.

An employer could choose to pay more however this would be at its discretion.

Where the lay-off leads to dismissal, the employee may have an entitlement to redundancy pay and, in certain circumstances, he/she may be eligible to complain of unfair dismissal to an employment tribunal. For further information on this, please contact our Employment Team on the details displayed at the end of this article.

How long can a lay-off period last and could this lead to redundancy?

A long lay-off period can last as long as the terms specified in the contract.

However, there is a mechanism within the statutory scheme through which redundancy may be triggered. If the lay-off lasts for four weeks in a row, or six weeks in a 13-week period, employees can opt for redundancy. In this case, a statutory redundancy payment would be triggered if they are eligible.

What if there is no contractual right for the employer to lay off/ implement short-time working?

This may be treated as a breach of contract leading to the employee resigning and claiming constructive dismissal in response to the breach by the employer.

Jas Dubb explains, “Employers may be able to take advantage of contractual lay-offs and short time working provisions where necessary, however, they should be mindful and aim to be transparent with employees as to the reasons for the need of temporary suspension/reduction of work as well as the possible alternatives, including the consideration of redundancies. Specific legal advice is imperative before seeking to implement changes to employee terms and conditions.”

For further guidance on this issue or any other employment related matter, please contact Jas Dubb on [email protected] or 0121 710 5929.