Lay-offs and short-time working are ways that an employer can ask an employee to stay at home temporarily if there is not enough work; or reduce their hours. The aim is to avoid having to make redundancies.
People often speak of being “laid off” when they lose their job; either receiving a sum of money or being made redundant. However, “lay-off” is a statutory term and means something specific in employment law.
A lay-off is where an employee is off work for at least 1 working day because there is not enough work for them. Lay-off can be used by an employer when there is a temporary reduction in the work available to employees, but it is likely that work will pick up again. For example, in the construction industry where one job has finished and the next big job is due to start within a few weeks.
Short-time working is where an employer cuts an employee’s hours on a temporary basis, due to a downturn in business.
Firstly, it is important to note that in order to lay someone off without pay or put someone on short-time working, it must be expressly stated within the contract of employment.
A lay-off and short-time working clause would not normally be included in a contract ‘as standard’ although they may be more common in certain industries. However, before the government’s furlough scheme was in place to protect the pay of employees during the current Coronavirus pandemic, employers with lay-off and short-time working clauses realised the value of including these in the contract.
If there is insufficient work and an employee is sent home, they should be paid in full if there is not an express contractual right to lay them off. If there is no contractual right and an employer sends an employee home with no work and no pay, this would be a breach of the employment contract.
The only time lay-off could be imposed without a term in the contract would be where there is a custom of laying off within that particular business, which won’t be the case for most. The custom has to be “reasonable, certain and notorious and such that no workmen could be supposed to have entered into service without looking into contract.it is widely accepted within the organisation” (taken from a 1980’s case).
Lay-offs were very common in the 1980’s so this argument would only apply now in very limited circumstances so it is best to include a lay-off clause in contracts of employment.
If there is no contractual right to impose short-time working, cutting an employee’s hours and pay would be a breach of their employment contract.
In both cases, without the contractual right to impose lay-off or short-time working, an employee would have a potential claim for breach of contract and / or unlawful deduction of wages.
Statutory Guarantee Pay
If the employment contract allows for unpaid lay-off, the employee will be entitled to receive statutory guarantee pay. From 6th April, this is £30 per day for 5 days in any 3 month period, so a maximum of £150.
If the employee usually earns less than £30 a day, they would receive their normal daily rate. Statutory guarantee pay cannot be paid for any day that the employee does some work.
An employer can choose to operate their own guarantee pay scheme which cannot be less than the statutory rate. Note, this changes every April. If the employer operates its own scheme, statutory guarantee pay would not be payable in addition.
If statutory guarantee pay (or contractual guarantee pay) is not paid to the employee, the employee would have a claim for unlawful deduction of wages.
To be eligible for the statutory guarantee pay, the employee must:
– have been employed continuously for 1 month;
– not refuse any reasonable alternative work (including work not in the contract);
– not have been laid off because of industrial action.
There is no limit on the amount of time that someone can be laid off or put on short-time working. However, an employee can apply for redundancy and redundancy pay if they have been put on lay-off or short-time working and receive less than half a week’s pay for:
- 4 or more weeks in a row: or
- 6 or more weeks in a 13 week period.
Note, like normal redundancy, only employees with 2 years’ continuous service are entitled to claim a redundancy payment.
In order to claim a redundancy payment, there are strict rules to follow:
- The employee must write to the employer within 3 weeks of the last day of the lay-off or short-time period and claim redundancy.
- The employer has 7 days to accept the claim or serve a written counter-notice.
- A counter-notice will be served if the employer expects work to be available within 4 weeks and last at least 13 weeks. If an employer sends a counter-notice but doesn’t believe it to be true, the employee will have a potential claim for constructive unfair dismissal in the employment tribunal.
- If a counter-notice is not received, the employee is able to assume the redundancy claim is accepted.
- The employee must then resign by giving their contractual notice in writing to be entitled to the redundancy payment. This must be done within 3 weeks starting from:
- 7 days after written notice when given (and no counter-notice was received)
- The date the employer withdrew any counter-notice given
As there are strict time limits for both the employee and employer, we would always recommend taking legal advice before implementing a period of lay-off or short-time working; or as the employee, making a redundancy claim in this way.
Coronavirus and Lay-Off / Short-Time Working
Before the government announced the Coronavirus Job Retention Scheme (also known as the ‘furlough scheme’), many of the first businesses who were forced to close, had to either make their employees redundant or implement lay-off or short-time working. As we now know the furlough scheme can be backdated, many employers were able to move their staff from lay-off onto the furlough scheme.
However, when the furlough scheme ends, if businesses struggle to operate as normal, they may need to consider making redundancies. If the contract of employment has a lay-off and short-time working clause, this would enable employers to retain employees for a few more weeks (only paying the guarantee payment if it was a lay-off) before having to commit to making permanent redundancies.
If contracts do not contain this clause, it is a good idea to obtain employees’ consent to insert it as a new clause into the contract. Because temporary lay-off or short-time working would presumably be more attractive than redundancy, most employees would likely agree. Please note, there are rules on collective consultation if more than 20 employees’ contracts are being changes. Please get in touch if this affects you.
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