Human Law Ezine - February 2009
Handling staff lay-offs and redundancies within the law
In these economically challenging times there are few companies not having to consider issues relating to short-time working, staff dismissals and redundancy. Doing so in a way that keeps your workforce on-side and avoids costly legal battles is what is all important.
In this follow up to our January Ezine – Negotiating in a Redundancy Environment - Mediator Justin Patten explores some of the issues for business owners and managers and offers his observations on how to handle lay-off’s and redundancy in the least disruptive fashion.
What is a lay-off?
When employees are not provided with work by their employer, and the situation is expected to be temporary, they are regarded as laid off.
Where the lay-off amounts to dismissal, the employees may have an entitlement to redundancy pay or, subject to certain conditions, they may be able to complain of unfair dismissal to an industrial tribunal. This is what every employer needs to avoid.
Is there a right to lay-off employees?
There is a general right at common law to tell most employees not to turn up for work but there is no general right not to pay them because work is not available.
In what circumstances can an employer lay-off employees?
This can be done where there is an express contractual right agreed between employer and employee. Alternatively, there may be an agreement covering the issue between the company and the union, or a national agreement for the industry which the employer follows. Such an agreement has contractual force only if it is incorporated into the individual employee's contract of employment.
The right of an employer to lay-off may also be implied if it can be shown (by clear evidence) that it has been established over a long period by custom and practice.
Even if you have the right not to pay full salary during a period of lay-off, most employees will be entitled to five days’ Statutory Guarantee Pay (currently £21.50 per day) in any three month period.
Against this background what should employers do?
Recognise that the negotiating position has shifted towards the employer. With unemployment rising we have now moved to an era where the importance of legal rights has diminished. The reality is that for those businesses which are in trouble or facing challenges, both employer and employee have an almost identical objective - just staying afloat. As a consequence an employee who has had his or her legal rights infringed may have legal redress but can that person afford to take legal action? Would there be another job to go to? Could that person afford legal fees and would the company be able to pay the Tribunal award if it lost?
A company must consider the risks and look to actively manage the process using negotiating and mediation techniques rather than heavy handed tactics.
Try to be as open and honest as possible, both in terms of your decision to lay people off and how you implement your decision. Employees are likely to be more receptive to your proposals if they understand why you need to lay people off – particularly if they understand that you are trying to safeguard their jobs in the long term. The reality is the market for many businesses is very difficult and employees will know this. Overcome barriers by listening to people and letting them know that you hear them.
Employees who believe that they have been unfairly singled out are far more likely to bring claims against you. You should therefore consult with employees or their representatives and carry out a fair selection process before deciding whom to lay-off or dismiss. You may also wish to consider requesting or requiring employees to take annual leave instead of laying them off, or implementing short time working (where an employee’s contractual hours are reduced).
Be willing to be flexible. Just because you have legal advice or you have commercially decided to set on a course, you can always vary your approach. Be true to yourself, but assume the role that is needed in the moment. Sometimes just hanging back and allowing your staff to talk can be a good thing and may actually save quite a bit of money in legal fees.
Finally, if you know that redundancies are inevitable, do not try to use lay-offs as a means of avoiding paying redundancy payments. This could lead to employees resigning and claiming constructive unfair dismissal and therefore could cost you a lot more than if you went through a fair redundancy process. This also undermines your integrity.
For advice on handling lay-offs and redundancy situations contact Human Law Mediation here.
Further reading: Using mediation in redundancy situations
Keeping away from Employment Tribunals and Court Room Battles – free guide