Coronavirus Crisis Planning

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17 March, 2020

What does it mean to lay-off an employee?

Essentially, laying off employees means that you will not provide them with any work and they will not receive pay for a reasonable period. However, they will still be retained as employees and will therefore still accrue holidays and preserve their continuous service. This is an alternative to dismissal and a temporary way of dealing with an unexpected downturn in business, which in this case would not have been foreseeable.

When can you lay-off employees?

You do not have the automatic right to lay-off employees, and in order to do so there must be an express contractual right. The contract should also make it clear that during any period of lay-off, employees will not receive their normal pay. If you were to lay-off employees without the contractual right to do so, there could be a risk of a claim for breach of contract and the employee's options would be as follows:

  • Accept the breach and treat the contract as continuing, while claiming statutory guarantee payment (see below);
  • Sue for damages for breach of contract in the Civil Courts or Employment Tribunal (the remedy for which would put them back in the position as if the breach had not occurred);
  • Bring a claim in the Employment Tribunal for unlawful deductions from wages; and/or
  • Bring a claim in the Employment Tribunal for constructive unfair dismissal giving rise to the basic award (equivalent of redundancy) and compensation.

Please note that in terms of a claim for breach of contract, most employees do not have an implied right to be provided with work, rather there is an implied right to be provided with pay. Therefore, when you choose to lay-off employees without pay (without the contractual right to do so) it is the non-payment of wages that is likely to give rise to the breach rather than the failure to provide work.

If the contract does not give you the right to lay-off, then any proposal to lay-off would be subject to consultation and will require the employee's agreement. Given the current circumstances, it is likely that employees would be more amenable to accepting this as an option to try to avoid redundancies where possible. Most people are also trying to limit their contact with others (particularly where they live with an elderly/vulnerable relative) and may find this an appropriate way of doing so, albeit they forfeit the right to be paid.

Implied right to lay-off

In the absence of a contractual right to lay off, it may be possible to argue that there has been a custom and practice of laying-off within your business which creates an implied right to do so. For this to be the case, the custom must be both reasonable, certain and notorious and such that no employee could be supposed to have entered into service without looking into it as part of the contract.

This is a strict test and one which you must be confident you can satisfy before relying on an implied term to lay-off.

Statutory Guarantee Payments (SGP)

Employees may be entitled to SGP on up to 5 "workless" days in a three-month period. A "workless day" is a day during any part of which the employee would normally work, but they cannot because:

  • There is a reduction in the requirements of the business for work of the kind which they are employed to do; or
  • There is any other occurrence which effects the normal working hours of the business in relation to this type of work.
  • In order to qualify for SGP, the employee must:
  • Have at least one month's continuous employment;
  • Reasonably make sure they are available for work;
  • Not refuse any reasonable alternative work; and
  • Not be laid off due to industrial action.

SGP is currently capped at a daily rate of £29 per day (up to a maximum of 5 days = £145) or if they usually earn less than £29 they would get their normal daily rate. If they work part-time, this will be applied on a pro-rata basis.

Right to claim redundancy pay

It is important to note that employees should not be laid off for longer than necessary, as employees may argue they have been made redundant and be eligible for a redundancy payment. Provided an employee has two years' service, if they are laid off for four or more consecutive weeks or six weeks in any 13-week period, they have a right to terminate their employment and claim a statutory redundancy payment.

Before doing so, the employee must serve written notice of their intention to claim on the employer, on the last day of the last week of lay-off or within four weeks of the last day. An employer may then contest this and serve a counter-notice on the basis that work will soon be available and in any event within 4 weeks and will last for at least 13 weeks (although given the uncertainty at present around the Coronavirus this may be difficult to promise, and if the work is not provided in that time-frame the defence will automatically fail). If you provide a contractually guaranteed rate of pay or a fall-back rate of pay, an employee cannot be laid off for the purposes of claiming a redundancy payment under the statutory scheme.

Short-time working

Short-time working is similar to laying-off, but allows you to provide employees with less work and less pay for a period whilst retaining them as an employee. If you provide a contractually guaranteed fall-back rate of pay that exceeds half a week's pay, an employee will not be subject to statutory short-time working.

The contractual position for short-time working is the same as outlined above and the options available to an employee in cases of a breach of contract are the same. An employee may still be entitled to SGP (as outlined above) during any part of which the employee would normally be required to work in accordance with their contract, but they are not provided with work for the reasons outlined under SGP above.

The right to claim redundancy pay also arises for short-time working and can also be made up of a mixture of short-time working and lay-offs, as outlined above.

Holidays

In terms of insisting that employees use their holidays, under s.15 of the Working Time Regulations 1998 employers can require employees take accrued annual leave on notice which is double the amount of days than they are required to take. For example, if you require them to use two weeks' leave, you must provide four weeks' notice. This applies to all workers and employees. Where employees are off-sick or self-isolating and in receipt of SSP only, you may want to invite and/or encourage them to utilise annual leave where possible to benefit from holiday pay instead.

Other types of leave

You may wish to remind staff of parental leave entitlements/time-off for dependants (albeit this is unpaid) and send around a communication relaxing the notice requirements for this, as parents may take this up in due course if the schools do close, or their children become unwell.

Rotation system/working from home

A couple of other options that we have been suggesting to clients, is to consider if provisions can be put in place to allow staff to work from home. Where this is not possible, you may want to consider laying-off employees on a rotation system. For example:

Team A: working as usual for a week and then rotate with Team B

Team B: are on-call/laid off for a week and then rotate with Team A

Each team can then have managers split across them to ensure that if one team is jeopardised, the other can then safely cover.

We are also advising clients not to panic and make redundancies at this early stage as it is said that the UK will not reach the peak of the virus for a few weeks. As such, there is a risk that by reducing the headcount of the workforce too soon, if there are then cases of coronavirus and employees are absent from work there may not be enough staff to cover during that period, as it is likely that others that came into contact with that individual would have to self-isolate.

Conclusion

I trust that the information above will assist you in developing a strategy for crisis management and help you to be pro-active in managing the pandemic as far as possible. However, please bear in mind that government advice is prone to change on a daily basis and therefore subject to change.

For more information contact Trishna Modessa-Parekh in our Employment & HR department via email or phone on 01772 220215. Alternatively send any question through to Forbes Solicitors via our online Contact Form.

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