Lay-Offs and Short-time working—Lock-outs

Lay-Offs and Short-Time Working

Key points

• In some situations, an employer will prefer to lay-off his employees or place them on short-time working rather than make them redundant. One or other of those options will usually be considered when the employer is in financial difficulties (or has related business problems, such as the non-delivery of essential raw materials) and believes that those problems are likely to be short-lived.
• However, whatever his difficulties, an employer does not have the right either to lay-off any employee or keep him (or her) on short-time working unless there is an express term to that effect in the employee's contract of employment. If he takes unilateral action (that is to say, in the absence of any such express term), he is in breach of contract and could force the employee to resign and pursue a complaint of unfair constructive dismissal (including a claim for damages for breach of contract).
• There is, of course, nothing to prevent an employee agreeing to accept a cut in pay or a reduction in working hours if persuaded by his employer that the only other alternative is redundancy. But that would be a matter for discussion and formal agreement.

Meaning of 'lay-off' and 'short-time working'

• An employee will be held to have been laid-off by his (or her) employer for a week, if:
  1. his contract of employment states that he will be paid only if he is provided with work of the kind that he is employed to do; but
  2. he earns no pay at all in respect of that week because his employer has not provided him with any such work to do.
• An employee will be treated as having been kept on short-time working for a week if his employer gives him some work to do during that week (being work of the kind that he is employed to do), but the money he earns as a result is less than half a week's pay (section 147, Employment Rights Act 1996).

Guarantee payments

• In the absence of any term in an employment contract or collective agreement, that provides for a fall-back or guaranteed minimum payment on such occasions, an employee who is not provided with work throughout a day on which he (or she) is normally required to work may nonetheless be entitled to be paid a statutory guarantee payment of a specified minimum amount for each of a maximum five workless days in any period of three consecutive months. But, to qualify for a guarantee payment, an employee must have been employed for a continuous period of at least one month ending with the day immediately preceding the relevant workless day. 

Lay-offs, short-time working and redundancy

• An employer may face a claim for a statutory redundancy payment if he repeatedly lays off one of his employees or keeps him (or her) on short-time working (even if he has the contractual right to do so or the employee in question has agreed to those arrangements). Section 148(2) of the 1996 Act (qv) states that an employee who is laid off or kept on short-time working for four consecutive weeks (or for a series of six or more weeks, of which not more than three were consecutive, within a period of 13 weeks) – discounting any weeks where the lay-off or short-time was attributable to a strike or lock-out – may write to his employer announcing his intention to claim a redundancy payment. However, he must do so not later than four weeks after the end of the last week on which he was laid off or kept on short-time working. He must also (either at the same time or not later than three weeks afterwards) give his employer one week's written notice of his intention to terminate his employment (or such longer period of notice as he is required to give under his contract of employment) (ibid. section 150).
• When served with an employee's written notice of intention to claim a redundancy payment, an employer may respond in one of two things. He may:
  1. either dismiss the employee and face the likelihood of a claim for a redundancy payment arising out of that dismissal; or
  2. write to the employee within the next seven days declaring his intention to contest any liability to pay him (or her) a redundancy payment and inviting him to withdraw his notice of intention to claim.
  However, the employer would be ill-advised to serve the counter- notice in (b) above unless he reasonably expects to provide the employee in question with at least 13 weeks of employment (during which the employee would not be laid off or kept on short-time working) beginning not later than four weeks after the date on which the employee served his notice of intention to claim. But if, during that four-week period, the employee is again laid off or kept on short-time working for each of those weeks (discounting any weeks where the layoff or short-time was attributable to a strike or lock-out), it will be presumed without more that the employer is (or was) unable to comply with his commitment to provide those 13 consecutive weeks of uninterrupted employment (ibid. section 152).
• If an employee declines to withdraw his notice of intention to claim (in spite of having received a counter-notice from his employer contesting any liability to pay him a redundancy payment), he must (if he has not already done so) write to his employer within the next three weeks terminating his employment by a week's notice or by such longer period of notice as he is required to give under his contract of employment (ibid).
• In the final analysis, it will be for an employment tribunal to decide whether or not an employee, who has terminated his employment in the circumstances described above, is entitled to a redundancy payment.
• It should be pointed out that a redundant employee will not qualify for a statutory redundancy payment unless employed for a continuous period of two or more years (excluding any period of employment that began before his or her 18th birthday) and under normal retiring age or 65 (whichever is the later) at the effective date of termination of his contract of employment.