26th February 2009


 Issue No.  2009/02




In the current economic climate employers are, quite rightly, monitoring costs and work levels.  Whilst redundancies are being considered employers should first look at whether the current situation is short term and whether temporary Lay-Off is a better alternative to redundancy.  Lay-Off being defined as having no work for a full normal working day.
The advantage of Lay-Off is that your skilled employees remain your employees and can be called back to work when the volume of work increases.  In the first of a trilogy of Information Updates on Lay-Off, we examine the legality of ‘laying off’ employees.
The right to ‘Lay-Off’ employees
Employers do not have a general right to ‘Lay-Off’ employees without pay.   They need to have the contractual right (or the right through custom and practice) to do it.  This is best achieved by having a written term within the Contract of Employment.  This is usually in either the initial contract document or Employee Handbook but in both cases must be signed for in agreement.
A worker is entitled to be provided with work and be paid for the normal contractual hours.  This will usually be as detailed on the Principal Statement of Terms of Employment.  When there is no work available, under normal contract law the employee must be paid for the contractual hours.  However, when an employer lays-off an employee in line with a contractual right to do so, then the obligation to pay them is effectively suspended for the Lay-Off period.
Greater Flexibility for Employers
There are currently no ‘legally’ specified rules governing how the Lay-Off is to be applied or how employees are to be selected for Lay-Off.  Unlike with redundancies there is no requirement to ‘consult’ for periods or minimum notice required.  This allows a degree of flexibility for employers which may prove useful in the current difficult times.
Employers must though give some reasonable notice of the Lay-Off, although ‘reasonable’ is not defined.  In practice employers should make this as long as they can.
There is always a risk that the Employee might resign and claim constructive dismissal if they perceive they have been unreasonably laid-off.  Situations where this might happen include if the Employer unfairly singles the Employee out. 
Provided the contractual right exists and there is genuinely no work to do, or there is a reduced need for the work to be done by those in a unique or stand alone positions, there should be no real problem in effecting a Lay-Off.  
If selection for Lay-Off requires say 3 from 10 workers in the same occupation to be laid-off it will be important to have objective reasons for selection to avoid any suggestion of discrimination.  Alternatives would include sharing the Lay-Off equally amongst the whole group or limiting the Lay-Off to a very small number.
The ‘Short Time’ alternative
Short time working is another alternative to full day Lay-Off.  Instead of laying-off for whole days, employees may alternatively work shorter days than normal.  They may attend each normal working day but do less work and consequently receive less pay.  Again, a Contractual Term must be in place to allow short time working and it must genuinely be as a consequence of shortage of work.
It is essential that specific advice is taken when considering the implementation of any of the above.
Finally – entitlement to receive Lay-Off Pay and redundancy implications are covered in the next two Information Updates.  Stay tuned.




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