Coronavirus guidance for employers: staffing

This guidance note explores some of the key staffing issues employers may face in light of the coronavirus outbreak. It discusses in general terms what options are available to reduce staffing and manage redundancy. It also sets out a number of further steps which businesses and employers may wish to consider.

How to avoid redundancies

During a public health crisis, there are a number of options available to avoid redundancies including annual leave, lay-off, short-time working, reduced hours, unpaid leave and agreed pay cuts. It's important to engage with staff as early as possible.

The terms of the contract of employment impact the available avenues for employers and should be considered in the first instance. Some contracts entitle employers to reduce the work available to employees (potentially to providing no work and no pay at all).

Lay-off and short-time working

Occasionally, there is a contractual provision for lay-off or short time working.

• Lay-off- occurs when there is a temporary break rather than termination of employment. During that period the employer provides employees with no work (and no pay) for a period of time.
• Short-time working occurs where the employer requires the employee to do less than their full contractual hours and receive less pay as a result for a specified number of weeks.

Where there is an express contractual provision in the individual’s written contract or other written documentation, the matter may be straight forward. However, it will be a breach of contract for an employer to lay off employees or put them on short-time working without pay when they do not have an express or implied contractual right to do so.

In most industries a contractual lay-off provision is rare. Alternatively, there may be an agreement covering the issue between the company and a trade union, or a national agreement for the industry which the employer follows.

In the absence of something in writing, there may be a practice in the organisation such that there is an “implied” right to lay people off. For a term allowing lay-offs to be implied into a contract:

• There must be a custom of laying-off within that particular business.
• The custom must be both:
• “reasonable, certain and notorious”; and
• Such that no employee could be supposed to have entered into service without looking to it as part of the contract.

This is a strict test and an employer should be confident they can satisfy it before they rely on an implied term to lay off employees.

If the contract does not permit lay-off or short-time working, both parties can still agree to alter the contract terms to include those provisions.

In some circumstances, employees may be entitled to statutory redundancy pay after a period of lay off and short time working. In addition, certain fairly minimal payments are guaranteed during such periods.

If an employer lays off an employee or puts them on short-time working in the absence of an express or implied right to do so, the employer will be in fundamental breach of contract entitling the employee to resign and claim constructive dismissal.

Annual leave - or additional paid/unpaid leave

Provided the contract of employment is not broken, an individual’s right to holiday is unaffected.

However, depending upon what is stated in the contract, employers may be able to require employees to take annual leave on specified dates. That way, the employees use up their annual leave during quieter periods (but continue to be paid for that leave). The employer can choose to put some employees on annual leave while retaining others to perform the available work, subject to not being capricious or discriminatory when deciding who to select.

An employer must give an employee notice of the requirement to take annual leave of twice the amount of the leave. For example, if the employer requires the worker to take two weeks' leave, it must give the employee at least four weeks' notice that it requires the individual to take that leave.

In most cases, providing the employees continue to be paid in full then if they are required to take annual leave there is unlikely to be a valid claim.  However, that is unlikely to be a long term solution for many employers.

Pay cuts/part time working/ unpaid leave

Unpaid leave

An employer may ask employees to take unpaid leave if there is no work available but, other than where there is a right to lay people off or to not provide them with any work, additional unpaid leave would have to be by agreement or by imposing new conditions in the employee’s contract by dismissing and re-engaging the employee on new terms (discussed below).

Pay cuts

An employer can also ask employees to agree to pay cuts, providing it does not reduce pay below the National Living Wage or National Minimum Wage. If employees do not agree to pay cuts, enforcing that unilaterally will be a fundamental breach of contract entitling the employee to resign and claim constructive dismissal but employers could potentially impose such changes by terminating and re-engaging (see below).

Part time working

 Employers can ask employees to agree to work part time even if there is no short time working provision in the contract.

Where there is any potential for compulsory steps being imposed - whether by way of dismissal and re-engagement or by redundancy – any requests for agreement or volunteers should be handled carefully as that may trigger the statutory obligation to treat the request for changes as a potential redundancy and to consult with employee representatives (as discussed below).

Dismissing those who refuse to agree to changes

In the event that, following consultation, employees refuse to agree to changes to terms and conditions such as a pay cut or part time working, then it can potentially be imposed upon them by dismissing them with notice and offering to re-engage them on new terms. In the circumstances being faced by many employers at the moment, such dismissals are likely to be fair if the employer has a good business reason for the change (the difficulties presented by coronavirus are likely to be a good business reason but employers will have to be able to demonstrate the difficulties caused by the outbreak for their business) and has behaved reasonably during the consultation process and in identifying who should be dismissed.

Dismissals in these circumstances should be handled in largely the same way as redundancies in that there should be consultation (with employee representatives where there is a collective redundancy (see below)) and consideration given to alternatives.

How to handle redundancies

Where an employer proposes to make redundancies, it must consult upon its proposals or risk the dismissals being unfair as well as other types of claim. With whom the employer should consult and the potential claims in the event of a failure to do so will depend upon the number of employees involved. At the very least, there should be some consultation with individuals potentially affected before any decisions are made.

Collective redundancy

Where an employer is proposing to dismiss as redundant 20 or more employees within a 90 day period, it must consult with employee representatives (either recognised trade unions, an alternative appropriate body of employee representatives or employee representatives who are elected for the purpose of such consultation). It is not enough to consult with employees individually. If the employer does not recognise a trade union and does not already have a body of elected employee representatives, employees will need to elect representatives via a confidential election process facilitated by the employer.

Employers in a collective redundancy situation must also complete an HR1 form and send that to the Department for Business, Energy and Industrial Strategy, available here: https://www.gov.uk/government/publications/redundancy-payments-form-hr1-advance-notification-of-redundancies

Failure to comply with the complex statutory scheme can lead to a protective award being made by an Employment Tribunal. The Employment Tribunal can order an employer to pay a day’s actual pay for a period that the tribunal considers just and equitable but the maximum protective award is 90 days’ actual gross pay for each dismissed employee. (The statutory cap on a week’s pay does not apply.)

From the date on which collective consultation begins, there must be a period of at least 30 days before the first employee’s dismissal takes effect. Notice can be served during that period providing consultation has been meaningful before a decision to give notice is made. The period is increased to 45 days where the proposal is to dismiss as redundant 100 or more employees.

A special circumstances defence may be available where it is not reasonably practicable for the employer to comply fully with statutory requirements regarding consultation. The onus is on the employer to show both that there were special circumstances and that it took all reasonably practicable steps at the time. The rules regarding this defence are complex and specific advice should be sought by employers who may seek to rely upon the special circumstances defence. Please do not hesitate to get in touch if you would like more detailed advice.

It is important to note that in view of the complexity of the law relating to redundancy and dismissals, courts and tribunals may be prepared to take a generous view of the evidence in favour of an employee. Employers should therefore consider seeking specialist legal advice at an early stage.

Differing obligations for different categories of workers

Individuals have differing rights depending upon whether they are employees, self-employed or “workers” (which is a middle category between self-employed and employees). However, it is sometimes not clear which category an individual will fall into and the contract itself is not necessarily conclusive if there is a challenge.

Employees with two years’ continuous service are entitled to statutory redundancy pay, to minimum notice and to sue for unfair dismissal. Employees with less than two years’ continuous service, on the other hand, do not have those rights (other than a right to one week’s notice).  It should, however, be noted that there is no service requirement for certain claims, including where an individual is selected for redundancy on the basis of a discriminatory reason or for other reasons such an whistleblowing, trade union membership etc..

Self-employed persons or contractors do not have employment law rights.

Workers are entitled to certain limited employment rights including protection against unlawful deductions from wages and the statutory minimum level of paid holiday. However, they are not entitled to statutory redundancy pay, protection against unfair dismissal or minimum notice periods.

There are, of course, potential cost implications for employers in the event that an employee is found to have been unfairly dismissed on grounds of redundancy. An Employment Tribunal can order an employer to pay a basic award (the equivalent of a statutory redundancy payment if one has not already been paid) and a compensatory award for loss of earnings, pension loss etc. There is a cap on the compensatory award of the lesser of 52 weeks’ gross pay or, currently, ￡86,444, increasing to ￡88,519 from 6 April 2020. Such a cap does not apply if the employee was selected for redundancy for carrying out health and safety activities, making a protected disclosure (whistleblowing) or where there has been discrimination under the Equality Act 2010. Where there has been a failure to collectively consult (outlined above) protective awards of up to 90 days’ actual gross pay per dismissed employee can also be made.

Guidance

Several government bodies are regularly publishing up to date guidance on this ever evolving situation. Employers may find helpful information here:

https://www.acas.org.uk/coronavirus

https://www.nhs.uk/conditions/coronavirus-covid-19/

https://www.hps.scot.nhs.uk/a-to-z-of-topics/wuhan-novel-coronavirus/

How can we help?

Please get in touch with our Employment Law Team if you or your organisation would like further assistance on this topic.

17 March 2020