COVID - 19 - Your employment law FAQs
20 March 2020
Carson McDowell has had a significant number of employment related queries about the increasing risk of COVID - 19 over the last few days. Rachel Penny, a partner in Carson McDowell’s Employment team has collated the most frequently asked questions and what her advice would be in response.
I run a coffee shop in the city centre and rely on office workers and shoppers for trade. Business has dropped off a cliff and I need to close my doors for the 12 plus weeks that the government is indicating this could take. What are the rules on temporarily laying off employees? I have six employees?
The temporary lay-off provisions (and their “sister” provisions, short-time working) can provide a bit of breathing space in the face of crisis. They permit an employer to temporarily lay-off employees, or reduce their working hours, with consequent reductions in pay.
Employees remain employed throughout the lay-off period. Temporary lay-offs provide immediate saving of salary costs, coupled with the flexibility to restore the workforce when business starts to pick up.
There are, however, a number of drawback and limitations:
First, there is no automatic right to lay off employees. An employer must have a contractual right to lay off, otherwise any enforced lay-off may amount to breach of contract (which would entitle the employees to resign and claim constructive dismissal) and / or an unlawful deduction from wages. Check your contracts of employments and employee handbooks (and your collective agreements with trade unions if you recognised one) to see what they say about lay off / short time working. If it is silent on the point, then you will need to get employees' agreement to lay off.
Second, there is a risk that if you lay off or put on short time working for too long, employees may trigger their entitlement to a statutory redundancy payment. Those trigger points are where the employee has been laid off or kept on short-time working (or a combination of both) for at least:
- 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.
There is still work for my business and my employees, but I’m really concerned about cash flow and my ability to meet payroll dates. Can I ask my employees to defer a proportion of their wages or to take a temporary pay cut?
Yes, you can ask and yes they can agree to deferrals or pay cuts, provided that the deferral / pay cut does not have the effect of pulling their rate of pay below National Minimum Wage. The question is, what do you do if employees refuse to agree to your request?
Pay is one of the core terms of an employment contract. If you impose pay cuts or salary deferrals unilaterally, that will be a breach of contract and / or an unlawful deduction from wages.
Now that schools are closing, many of my employees will have to take time off for a prolonged period to look after their children. Do I have to pay them? What are my rights? What are their rights?
Employees have the statutory right to take time off work to deal with an emergency involving a dependant (known as “dependent leave”). This includes dealing with school closures. An employer cannot penalise the employee for taking time off in these circumstances, provided the reasons are genuine. Statutory dependent leave is unpaid but some employer’s enhance that pay (again, check your contracts and policies).
But this leave is only intended to deal with the immediate emergency - it is not a long term solution. For lengthier closures, employees with children are likely to qualify for parental leave. This is another form of unpaid time off work to look after a child or make arrangements for their welfare. Each parent can take up to 18 weeks’ parental leave for each child, generally in blocks of a week at a time, up to four weeks per child per year.
Another option is for the employee to take some of their paid annual leave.
What most people are counting on however, is that they can somehow juggle work and childcare, whether that is by reducing their number of hours (and pay) or by being creative and flexible about what hours of the day the work can be done. At the end of the day, however, if the employee cannot fulfil his or her contractual obligations to work, he or she is not entitled to be paid.
I am determined to do everything I possibly can to keep employing my employees. Do you have any other ideas of practical things I can do to try and ride this out?
The following practical measures can offer employers greater short-term and long-term prospects of survival and success:
- Reducing headcount (restrict recruitment, withdraw job offers, defer new joiners, reduce non-permanent staff);
- Temporary stoppages (unpaid leave, holidays, lay-offs);
- Reducing hours (short-time working, part-time and flexible working and overtime bans);
- Consider secondments or “loans” of employees e.g. there have been mass lay offs in the food and hospitality sector – can any of those employees be “loaned” to businesses who are short on staff?; and
- Reducing remuneration (salary sacrifice, pay freeze, reduce pay or benefits, freeze bonuses).
An employer adopting any of these arrangements will need to consider carefully their legal and commercial implications. For example, some measures might:
- Contravene contractual arrangements and require employees' consent;
- Give rise to collective information and consultation obligations;
- Infringe rules of National Minimum Wage; or
- Have a detrimental impact on morale, motivation and the public image of the organisation.
I operate a very generous, contractual enhanced sick pay entitlement. Already we have increasing numbers of employees self-isolating on the back of the (ever changing) government advice. I cannot sustain this and need to cut the policy back to SSP only. What are the risks?
Where an employee’s sick pay entitlement is contractual, any amendment will amount to a variation of contract. An employer can only make such changes with:
- Employees’ written consent;
- Dismissal and re-engagement on revised terms; or
- Unilaterally imposing the change.
If a change is imposed on an employee unilaterally, they may “work under protest” and bring a claim for breach of contract or unlawful deductions from wages and / or resign and claim constructive dismissal.
Following on from the question, what if there is no job for that employee to return to once life returns to “normal” and all these restrictions are lifted?
If the longer-term impact of the pandemic is likely to mean that a reduced headcount will be required even when the business reopens then the employer may need to consider redundancies.
The procedure differs depending on the number of redundancies. Where less than 20 employees are being made redundant there is no statutory obligation to collectively inform and consult employees or their trade union or other employee representatives. However, even if the numbers of likely redundancies is less than 20, it is always necessary to follow a fair procedure in relation to each employee at risk of redundancy.
If an employer is considering making an employee redundant, they must follow the statutory dismissal procedure. This involves:
- Writing to the employee setting out the reasons for the redundancy;
- Meeting the employee to discuss the redundancy (in the current climate, this may need to be a “virtual” meeting); and
- Holding an appeal if the employee asks for one.
Consider whether there are any employees who are pregnant or on maternity, adoption, or shared parental leave as special rules apply to them on redundancy.
A redundancy payment is due only where the employee has at least two years’ continuous service.
I’m a large retailer and if I need to make redundancies, it’s not a handful, it’s dozens of people. What is the redundancy process then?
Where an employer proposes to make 20 or more employees redundant over a period of 90 days or less, an employer has a duty to:
- Inform and consult appropriate employee representatives. Where 100 or more redundancies are proposed, consultation must begin at least 90 days before the first dismissal takes effect. For less than 100 redundancies, the consultation period is 30 days; and
- Notify the Department for the Economy on Form HR1.
A tribunal may award up to 90 days' pay in respect of each employee where there has been a breach of the information and consultation duty (a protective award). An employer may be fined if it fails to notify the Department for Economy.
If an employer is considering making an employee redundant, they must follow the statutory dismissal procedure as set out above.
My business was already struggling and this is the straw that has broken the camel’s back. I do not have the cash flow to keep paying employees through the consultation process, never mind the redundancy payments or the notice payments. I need to close my doors immediately. What do I do and will the government pick up any of the unpaid wages?
If an employer is insolvent and there is no means to pay certain sums owed to them, some of the debts can be claimed from the National Insurance Fund. These claims are:
- Statutory redundancy payment;
- Arrears of pay / wages - up to a maximum of eight weeks;
- Accrued holiday pay - up to a maximum of six weeks; and
- Statutory notice pay - one week after one calendar month's service rising to one week per year of service up to a maximum of 12 weeks (new earnings will be taken into account).
There is a limit of £547 a week on the amount an employee can claim for weekly pay.
If you have any queries please contact the Employment team at Carson McDowell.
*This information is for guidance purposes only and does not constitute, nor should be regarded, as a substitute for taking legal advice that is tailored to your circumstances.