CO2 shortage - what does it mean for employers?

Some manufacturing companies are having to look at introducing lay off or short time working for their employees to cover the temporary inability to…

Some manufacturing companies are having to look at introducing lay off or short time working for their employees to cover the temporary inability to provide work due to the CO2 shortage. We set out below an outline of what the employer needs to consider before implementing such a step...

Is there a right to lay the employees off or put them on short time working?

If you are looking to lay an employee off from work without pay or with reduced pay, or to reduce the number of hours they work and the pay accordingly, you need the right to do this. Without the employee’s agreement you risk an unlawful deduction from wages claim, a breach of contract claim and a possible claim for constructive dismissal and redundancy pay.

So as an employer contemplating short time working or lay off, the first step you need to take is to  look at the contract of employment. Does it provide that you can put the employee on short time working or lay off? If so, then you can look implementing such arrangements in accordance with the terms of the contract. Even if  there is no specific clause in the contract itself the employment contract may provide that it incorporates local collective agreements or national agreements and often it is these local or national agreement that provide the terms for short time working or lay off. 

The alternative is that there may be a term implied into the contract by custom and practice but this is a strict test and if it cannot be fulfilled puts the employer at risk of the claims stated above.  If you think you may have an argument for custom and practice, please take advice from your adviser at Weightmans before looking to rely on it.

In the absence of a contractual right, the other alternative is to see if you can obtain the employee’s prior agreement in writing to going onto short time working or lay off. This may be difficult where the blip in work is for a week or two but where short time working or lay off is put in place as an alternative to redundancy, often employees will agree to such arrangements.

Are employees entitled to any pay during a period of lay off or short time working?

The starting point for looking at this is the contract of employment and what that says about payments during such arrangements. Sometimes collective agreements may provide that even if an employee is put on short time working or lay off, they will receive a minimum amount of pay for that week, rather than receive no pay and in any event the employee should receive pay for the hours that he or she works.

Under the Employment Rights Act 1996 provided the employee has one month’s continuous service, he or she is likely to be entitled to a statutory guarantee payment (SGP). The SGP is payment for up to 5 “workless” days in a three month period. There is a basis for calculating the SGP and your Weightmans advisor will be able to provide you with details.  However the SGP is capped and the current cap (as of 6 April 2018) is £28 per day. Where the employee has a right to a contractual payment, the SGP doesn’t remove that entitlement but any contractual payment can be set off against the employer’s obligation to pay SGP.

A claim for redundancy pay can be a risk

Depending on how you operate the lay off or short time arrangements you could leave yourself open to a claim for redundancy pay from employees who have two years’ service.  In order to be able to claim statutory redundancy pay, there are various steps that an employee needs to take, starting with serving the employer with a notice of his or her intention to claim redundancy pay.  Should you receive such notification then contact your Weightmans’ adviser who can talk you through the next steps. 

However the key thing when planning short time working or lay off is for you to understand when an employee may be entitled to lodge such a notice so that with careful organisation or planning you may avoid the opportunity arising.

An employee may be entitled to statutory redundancy pay, if he or she has been laid off and/or kept on short time working for a period of four or more consecutive weeks or a total of six weeks (of which no more than three are consecutive) in any period of 13 weeks.  In order for an employee to be on short time working for a week, then the remuneration that he or she receives for that week would have to be less than half a week’s pay.  Therefore if there is no requirement for total lay off and instead short time working is implemented it may be possible for an employer to carefully plan arrangements for cover at the plant to avoid the risk of a claim for statutory redundancy pay.

Victoria Duddles is an Associate in the Employment, Pensions and Immigration team at national law firm Weightmans LLP:

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