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Lay-offs and short-time working guidance

Posted by Supportis Legal Experts in HR and Employment Law

The current situation around Coronavirus is causing major worry and uncertainty amongst a lot of employers.

Many businesses are now struggling. Whether it’s through a loss of employees due to illness, self-isolation and looking after dependants, or a loss in demand and customers.

This guide will take you through some of the most commonly asked questions that employers are raising around lay-offs and short-time working, and how to handle them.

What does laying off or short-time working entail?

Laying off is when the employer asks an employee to cease working for more than 1 day, whilst retaining them as an employee.

Short time working occurs when an employee’s hours are reduced.

I would like to implement lay-offs/short-time working. What do I do?

In some situations, an employer may need to temporarily close their business, or ask employees to reduce their contracted hours. Unless it is stated in an employee’s contract or is agreed otherwise, they still need to pay their employees for this time.

If the employer thinks they’ll need to do this, it’s important to talk with their employees as early as possible and throughout the closure.

Do I have a right to lay-off my employees?

There is a general right at common law to tell most employees not to turn up for work but there is no general right not to pay them because work is not available.

In what circumstances can I lay-off my employees?

This can be done where there is an express contractual right agreed between employer and employee.

Alternatively, there may be an agreement covering the issue between the company and the union, or a national agreement for the industry which the employer follows. This agreement is only applicable if it is incorporated into the individual employee’s contract of employment.

The right of an employer to lay off may also be implied if it can be shown (by clear evidence) that it has been established over a long period by custom and practice.

Can employees be laid off if there are no express or implied rights to do so?

Both parties may agree to alter the contract terms so that the lay off is not a one-sided act of the employer, but by mutual agreement e.g. where the only alternative is redundancy.

Do employees have a right to payment during a period of lay-off?

Employees can be laid off without pay where there is a specific term in their contract allowing the employer to do so.

They may be entitled to a statutory guarantee payment from the employer. Payment is limited to a maximum of 5 days in any period of 3 months and the daily amount is subject to an upper limit which is reviewed annually. 

What happens if there is a collective agreement providing for guarantee payments?

In these circumstances, on the application of all parties to the agreement, the Secretary of State can make an exemption order excluding employees from the statutory right to a guarantee payment.

An exemption order will be granted only where the collective agreement or order contains guaranteed pay provisions which are at least as favourable overall as the statutory scheme.

How long can a lay-off or short-time working last?

There is no limit as to how long it can last.

Can a claim be made for a redundancy payment because of lay-off or short-time working?

If an employee is either laid off or put on short-time working (receiving less than half a week’s pay) for 4 consecutive weeks – or for 6 weeks in a period of 13 weeks – because of a shortage of work, the employee can give the employer written notice that they are claiming for redundancy payment.

What is a wrongful lay-off?

If there is no contractual right to lay-off without pay but the employer does so, they will be deemed to be in breach of contract.

The employee may:

  • Choose to accept the breach of contract and treat the contract as continuing, while claiming a statutory guarantee payment.
  • Sue for damages for breach of contract.
  • Claim at an Employment Tribunal that there has been an unlawful deduction of wages.
  • Claim that the employer’s action amounted to a dismissal and claim for unfair dismissal and/or, if eligible, redundancy pay.

What do I need to be aware of as an employer regarding lay-off and short-time working?

  • Lay-offs and short-time working can be a useful way of handling temporary work shortages. However, you should understand that you have no right unilaterally to lay an employee off or to put them on short-time working, unless there is a term in the employment contract allowing you to do so.
  • You should take into account that an employee who is wrongfully laid off or put on short-time working may resign and claim constructive dismissal, complain that an unauthorised deduction from wages has been made or sue for damages for breach of contract.
  • Where an employee is laid off or put on short-time working, they may be entitled to statutory guarantee payments in respect of up to five workless days in any three-month period.
  • You may be liable to pay statutory redundancy payments to employees who comply with complex notice requirements having been laid off or kept on short-time working for specified periods of time.

If you are looking for further advice on this matter, or want guidance on a current matter, please get in touch on 0161 603 2156 / hello@supportis.com and one of our Employment Law experts will be in touch.

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