Covid-19 - Lay-offs and short-time
By Jennifer Cashman and Lefre de Burgh
15 March 2020
The Government announced on Thursday last that schools, colleges, and childcare facilities would close from the following day. Where possible, teaching would be done on-line or remotely. Cultural institutions would close. All indoor mass gatherings of more than 100 people and outdoor mass gatherings of more than 500 people should be cancelled. Today, it was confirmed that the country’s pubs and hotel bars are to shut down, leaving approximately 50,000 workers without any work to do, in the latest bid to stem the spread of Covid 19, with many expecting further measures from the Government over the coming days.
While Chambers Ireland’s Chief Executive, Ian Talbot, welcomed the government’s directives, he highlighted the impact on businesses and the need for clarity about available supports, saying:
“Many small businesses and the self-employed have had their work cancelled for the foreseeable future, while retailers around the country have been feeling tighter trading conditions since last week, and the hospitality sector in some parts of the country are facing cancellation rates upward of 60-70%...We ask that the State works with us by providing certainty for business through the challenges ahead.”
Kieran McQuinn of the ESRI remains hopeful that if the outbreak can be contained to a single quarter and “if by June/July things are returning to normal then the Irish economy should still register positive growth this year.”
Unfortunately, in the meantime, many businesses will have no option but to consider layoff of staff and short time working arrangements in light of the current crisis. Additionally, if an employee is confirmed to have Covid-19 or is medically recommended to self-isolate, employers may face the necessity of a period of shut down, for their business, depending on to what extent the business can be operated remotely. So, how does business respond to a situation what the Taoiseach describes as “unprecedented in living memory?”
In this Insight, we will examine lay-off and short-time.
What is lay-off?
Lay-off, as set out in s. 11 of the Redundancy Payments Act. 1967, has three elements:
- The cessation of employment because the employer is unable to provide work the employee was recruited to do;
- The employer (reasonably) believes that the cessation will not be permanent; and
- The employer gives notice to that effect, to the employee, prior to the cessation.
KEY POINT: Remuneration and Notice
While the Redundancy Payments Act 1967, addresses the circumstances in which employees can be put on lay-off, it does not address the question of payment. Therefore, unless the right to lay off employees without payment is specifically set out in the employee’s contract of employment or the staff handbook, there is no right to lay off staff without pay, unless the employer can establish that it is a custom and practice, within its organisation and/or industry.
Failure to pay wages without consent, can leave an employer open to a WRC claim for back-pay under The Payment of Wages Act, 1991. In practice, the majority of employees accept lay-off without pay in preference to immediate redundancy, in the hope that the work requirement will build up again and the employment can continue. Furthermore, it is our view that this Covid 19 situation constitutes exceptional circumstances which will allow employers not to pay for the duration of the crisis. However, it is important for employers to be aware of their legal obligations with respect to lay-offs and payment .
Another issue that arises is the obligation to provide notice of lay-off. Employers must give as much notice as reasonably practicable, which in the current crisis may be very little notice in reality. Notice does not have to be in writing but it would be a matter of best practice to provide confirmation of the lay off period to the employee in writing. Also, he employer should give a copy of the Form RP9 to employees when they are being laid off - https://www.workplacerelations.ie/en/publications_forms/lay_off_and_short_term_procedures_form_rp9_.pdf
What is short-time?
Short-time arises where there is a shortage of work, requiring less working hours, as opposed to a complete cessation. As set out at s.11 of The Redundancy Payments Act 1967, short-time has the following elements:
- The employee will be working less than half the contracted weekly hours or will be receiving less than half of the weekly pay;
- The reduction in hours or in pay is due to shortage of work;
- The employer has a reasonable belief that the situation will be temporary; and
- The employer puts the employee on notice of the reduction in hours and/or pay.
KEY POINT: Remuneration while on short-time:
Again, as with lay-off, while the Redundancy Payments Act 1967, addresses the circumstances in which employees can be put on short-time, it does not address the question of payment. Therefore, it is very important that your contracts of employment and/or employee handbook specify that your employees will be paid, “only for the hours they actually work”, while on short-time. Otherwise, employers could find themselves on the receiving end of WRC claims for back-pay, unless they can establish that it is custom and practice within their industry to only pay employees for the hours they actually work while on short-time. Again, in these exceptional circumstances, it is unlikely that employees will challenge the short-time arrangement but if they did the employer’s only option then is to make the employees redundant.
Social welfare entitlements on lay-off and short-time
The Department of Employment Affairs and Social Protection has confirmed that employees who are laid off temporarily as a result of the Covid 19 crisis can apply for a Jobseeker’s Payment. This application can be made online at www.mywelfare.ie or in person at any Intreo Centre.
Employees who are put onto short-time working by their employer due to a reduction in business activity related to Covid 19 may apply for a Short Time Work Support payment which application can be made in person at an Intreo Centre.
Right to redundancy
Notice of intention to claim redundancy by the employee.
An employee who is on lay off or short-time, or a mixture, for 4 or more consecutive weeks or more (or for 6 weeks in the preceding 13 weeks) is entitled to serve his/her employer with a notice of intention to claim redundancy, using the RP9 Form.
Counter-notice by the Employer.
If the employee serves notice of intention to claim redundancy, then the employer can serve counter-notice, that it will be possible to offer not less than 13 weeks’ continuous employment, without any period of lay-off of short-time, starting within 4 weeks of the date of the employee’s notice. If the employer cannot guarantee that, the employee must be made redundant.
Given the nature of the Covid-19 crisis, how rapidly it changes, and the expectation that it may be experienced in “waves”, it may be difficult for an employer to be able to “guarantee” 13 weeks unbroken employment, since the factors affecting the provision of work are largely beyond the control of employers.
If an employee enforces their right to move from being laid off to being made redundant, the employee is considered to have left their job voluntarily and lose their right to any notice payments under statute, but is still, or course, entitled to statutory redundancy payments.
Key Take-Aways: How to prepare your business for Lay-off and/or Short-time:
- Employee Contracts and Handbooks: Review both to see if you already have clauses in place to deal with a layoff or short time working situation. If not, then you will be relying on the exceptional circumstances presented by the Covid 19 crisis and the Government’s response to same.
- Communication: Double-check now that they have up-to-date contact details for all your employees, with their express consent to be contacted on their personal mobile phones, were a period of lay-off to occur. It is important that Employers keep in regular contact with their employees in relation to the availability of work and the continuation of the lay-off. Employers should emphasise to their employees that the priority is job retention and to avoid redundancies, it at all possible.
- “Notice” is likely to prove an issue, in the Covid-19 crisis. Ordinarily, employers are required to give “reasonable” notice of lay-off. Sometimes, the length of notice is set out contractually specified. However, in respect of Covid-19, employers may experience shut-downs with little or no notice, due to the public health nature of this crisis.
- An employee that has been on layoff/short-time for four weeks or more is entitled to serve a “notice” of his/her intention to claim redundancy on his/her employer.
- An employer can then serve a counter notice on the employee that, within four weeks of the date of the employee serving notice, the employer will be in a position to guarantee the employee 13 weeks unbroken work, in which case, the employee is not entitled to redundancy.
- A lay off does not involve a termination of the contract of employment, whereas a redundancy does.
- An employee who insists on moving from lay-off to redundancy, is legally viewed as having done so voluntarily, and therefore forfeits any right to notice payments.
For more information on the content of this insight please contact:
Jennifer Cashman, Partner | E.email@example.com | T. +353 21 4802708
Lefre de Burgh, Counsel | E. firstname.lastname@example.org | T. +353 21 4802700