The unprecedented COVID-19 (coronavirus) outbreak is presenting significant challenges for employers seeking to implement the recommendations for ‘social distancing’ that the Government has introduced.
Some businesses cannot operate remotely due to the nature of the business, or the lack of the required infrastructure. In such circumstances, those employers need to decide whether a temporary or permanent adjustment of employee numbers is required.
The COVID-19 outbreak has already led to thousands of positions being laid off temporarily and some being made redundant. As this crisis evolves, it is unfortunately inevitable that there will be many more lay-offs and redundancies as employers are forced to consider ways to reduce their wage bills temporarily, in order to try to cope with the impact of this pandemic on their businesses.
Chief among the considerations in this regard is the implementation of lay-off and/or short time arrangements. These arrangements are temporary, but they may be the solutions some employers need right now.
In contrast, redundancies lead to a termination of the contract of employment resulting in a permanent reduction in staff numbers.
In this article, we look at some of the key legal issues which arise when considering the implications of lay- off and short time working arrangements.
What is lay-off?
A lay-off situation arises when an employer suspends an employee’s employment because there is no work available and the employer expects the cessation of work to be temporary. The employer must notify the employee to this effect.
What is short time?
A short time working situation exists when an employer, because there is less work available for an employee than is normal, reduces an employee’s earnings to less than half the normal week’s earnings or reduces the number of hours of work to less than half the normal weekly hours.
Short time working can only be implemented when an employer expects this reduction to be temporary. The employer must notify the employee to this effect.
How much notice are companies obliged to provide to employees of temporary lay-off or short time arrangements?
Employees should be given as much notice as is reasonably practicable of the implementation of a period of lay-off and/or short time. There is no minimum notice period stipulated in legislation. The COVID-19 pandemic is an exceptional occurrence, which is likely to mean that in some instances, employers will be able to give very little, if any, notice. Even in circumstances necessitating urgent or immediate lay-offs, employers should explain to the employees the reason for the lay-off or short time working and keep employees informed of the situation during this time.
Notification of lay-off or short time is not required to be in writing, but it is advisable. Employers should also provide employees who are being placed on lay-off or short time with a Form RP9.
Can employees be placed on UNPAID lay-off or short time?
An employee can be placed on lay-off or short time in the absence of a contractual right to do so, provided there is no work available and the measure is a temporary solution. However, the lay-off or short time cannot be unpaid unless the right to do so is specifically provided for in the contract of employment or employee handbook, or if the employer can establish an implied right to do so (i.e. show that unpaid lay-off or short time is an established custom and practice within its business and/or industry).
An employer can also implement unpaid lay-offs or short time with the consent of the employees concerned. Employees may be willing to accept unpaid lay-off or short time on reduced pay in order to preserve their employment status and avoid being made redundant. This is particularly likely if the closure of business is intended to be a short-term measure to curb the spread of COVID-19.
In the absence of consent from employees, the current crisis probably presents the exceptional circumstances that may permit employers not to pay for as long as the current crisis persists. There is a possibility that employees could pursue a claim for back pay under the Payment of Wages Act 1991 (as amended), but it is unlikely that such claims would be viewed favourably where businesses are being forced to shut down in the interest of public safety.
What entitlement to social welfare payments do employees have during lay-off or short time?
Employees on lay-off or short-time may be entitled to Jobseeker’s Allowance or Jobseeker’s Benefit, provided they are available and capable of work and satisfy the PRSI contribution requirements outlined by the Department of Employment Affairs and Social Protection.
The Government has also announced the planned introduction of a new COVID-19 Pandemic Unemployment Payment for employees who have been laid off due to the impact of COVID-19 and who are not receiving any payment from their employers.
This will be a payment of €203 per week for six weeks. The Government is also urging employers to continue to pay employees who are absent from work due to the impact of COVID-19, at least at the current jobseeker’s rate of €203 per week. Employers will subsequently be able to claim a refund of the amounts paid from Revenue when submitting their payroll returns. The aim of this refund scheme is to alleviate any hardship on employees and to encourage the maintenance of the employment relationship.
Employees who are placed on short time working by their employer due to COVID-19 may apply for a Short Time Work Support payment under the Jobseeker’s Benefit scheme for the days the employee is out of work.
Selection of employees to be placed on lay-off or short time
When selecting employees for lay-off or short time working an employer should apply the same standard of selection criteria as for redundancy. It is important that employers apply fair, objective and reasonable selection criteria.
Also, employers should be aware that it is illegal to discriminate in lay-off or short time situations on any of the nine grounds set out in the Employment Equality Acts 1998 to 2015.
Can employees on lay-off or short time ask to be made redundant?
The benefits of implementing temporary measures of lay-off or short time in what we hope to be a temporary crisis include: maintaining the employment relationship, and avoiding the up-front costs associated with implementing redundancies and the necessity to engage in more formal consultation processes.
However, employers should be aware that where an employee is on lay-off or short time, or a mixture, for four or more consecutive weeks, or six or more weeks within a 13-week period, of which not more than three are consecutive, the employee can then seek to be made redundant. That is provided the employee has at least two years consecutive service, etc. The notice in this regard is given to the employer on Form RP9.
Any such claim for redundancy is limited to a statutory redundancy payment only and there is no right to a notice payment as the employee is considered to have left their job voluntarily. An employer who wants to avoid the redundancy can serve a counter notice on the employee within a period of seven days of receipt of the notice. Counter notice can only be served where the employer can guarantee not less than 13 weeks’ continuous employment, without any period of lay-off or short time, starting within four weeks of the date of the employee’s notice, otherwise the employee must be made redundant.
Other potential options for employers to consider
In order to avoid redundancies or an entitlement to be made redundant, employers could also consider facilitating requests from employees to take annual leave (provided the employer can pay for such annual leave) or encourage employees to consider taking a period of parental leave or other unpaid leave.
Reducing the employees’ working week to three days might also be a suitable option, if sustainable, as it would avoid any entitlement to be made redundant.
The COVID-19 outbreak has left many employers being forced to consider drastic measures to reduce their wage bill on a temporary and/or permanent basis. LK Shields attorneys are available to assist with any queries that might arise during these challenging times. Please contact Aoife Bradley partner at LK Shields for further information.
For more information please contact Joseph Granato, Communications Manager at L&E Global at email@example.com.