In light of the unprecedented global impact of COVID-19 on businesses, across all sectors of society, employers are now faced with making difficult calls on how to operate their business through these uncertain times.
Accordingly, many employers are now faced with the difficult decision to review headcount and assess whether it will need to effect lay-offs, short time working, reduced hours or redundancies.
The most appropriate option which may need to be effected, will be dependent on the nature of the employer’s business and long term forecasts. We have provided an overview of the options available to employers during these difficult times, as well as additional state supports introduced by the Irish Government as a result of the impact of COVID-19 on employers and employees. Please see our previous briefing here for more information on COVID-19.
What is a Lay-Off?
A lay-off is where an employer may temporarily be unable to provide work to their employee, the employer may lay- off employees for a period of time.
Lay-off under the Redundancy Payment Acts 1976-2014
The Redundancy Payment Acts 1976-2014 (the “Act”) provides that where an employee’s employment ceases as the employer is unable to provide work for which the employee was employed to do, that this will be considered to be a lay-off.
In order to meet the requirements of the Act:
- the cessation of the employee’s employment must be temporary; and
- the employer provides gives employees notice of the intention to lay the employee off.
In order to pursue this option, an employer must reasonably believe that the lay-off is a temporary measure which is being introduced rather than a permanent measure. If it is a permanent measure, this is a redundancy.
If this temporary measure is envisaged, what practical things do I need to consider?
An employer should check their staff’s contracts of employment in order to determine whether this has been contractually provided for. If the employees’ contract does not permit you to lay-off staff there is a risk in not paying staff, in these circumstances, that employees may claim breach of contract and that their wages have been unlawfully deducted.
However, it is not unlawful to not pay employees during any period of lay-off where employees have consented in writing in advance to not receiving wages during that period.
Additionally, it must be established whether the contract specifies of the period of lay-off, if provided for in the contract if the lay-off is paid or unpaid and how much notice is required.
If an employer ceases to pay an employee during a period of lay-off without a contractual right to do so (or without the employee’s consent) that may amount to an unlawful deduction of their wages.
If the employment contract specifies a certain period of notice of lay-off (e.g. 1 week notice of intention to lay-off) then if due to extenuating circumstances, such as COVID-19, an employee is laid off without prior notice, an employee may argue that he/she should be paid for the notice period.
If I intend to lay-off employees now as a result of COVID-19 what must I do?
In any event, where you intend to lay-off employee’s temporarily, an employer must give employees prior notice of intention to temporarily lay-off prior to it taking effect. Certain information should be included in such notifications issued to employees.
If I do have to lay an employee off now as a result of COVID-19 will the State provide any support to those employees?
Arising from the unprecedented turn of events arising from COVID-19, many sectors of the economy has been badly affected. In recognition of this, the Government has introduced the “Pandemic Unemployment Payment”, which an employee can avail of if he/she has been laid off due to COVID-19. Further detail of this payment is set out below.
COVID-19 Pandemic Unemployment Payment
This is a new measure imposed by the Department of Employment and Social Protection. It is a social welfare payment which will be paid at a flat rate of €203 per week for a six-week period. Its purpose is to quickly deliver a social welfare payment to employees and self-employed individuals who are unemployed due to COVID-19.
In order to qualify for this payment, the individual must be between 18 and 66 years of age and had been in employment which has now ceased due to COVID-19.
In order to ensure that an employee continues to receive benefits during the period of lay-off, employers should remind employees that, if circumstances do not improve and they are still laid off, at the termination of the six-week time period for Pandemic Unemployment Payment, an employee can still avail of Jobseekers benefit.
There are certain additional considerations which employers may need to consider around communicating and notifying employees of lay-offs.
COVID- 19- Refund Scheme
A further consideration for employers is the recent request, from the Minister for Social Protection, that employers continue to pay employees €203 per week in circumstances where an employer would have laid an employee off arising from a closure of the business. Those employees will remain on the employers pay roll for that period of time.
In order to receive this payment, the following conditions would be required to be met:
- The employee would have otherwise have been laid off because a business has to cease trading due to ‘social distancing’; or
- The employee would have otherwise have been laid off as a result of Covid-19.
Accordingly an employer, in these circumstances, may have to plan to facilitate this payment where possible. It will be a consideration for the employer in practice, whether this is feasible to continue to make these payments and if so for how long. The Department has advised that employers will be reimbursed within a number of weeks for this payment.
It remains to be seen what method of refund system will be required to be introduced in order to effect the payment. The Department of Social Protection and Revenue Commissioners are currently considering the mechanics of the refund system via the employers pay roll system.
What is Short time working?
Short time working is where employees work less than half their contractual weekly hours or receive half their weekly pay, and the reduction in pay and hours is as a consequence of a reduction in work.
Short time working meets the requirements of the Act if:
- any week an employee’s remuneration is less than one-half of their normal weekly remuneration or their hours of work are reduced to less than one-half of their normal weekly hours,
- the reduction in remuneration or hours of work is caused by a diminution either in the work provided for the employee by his employer or in other work of a kind which under their contract the employee is employed to do.
- it is reasonable in the circumstances for the employer to believe that the diminution in work will not be permanent and he gives notice to that effect to the employee prior to the reduction in remuneration or hours of work,
Therefore, an employer must reasonably believe that this reduction in hours is a temporary measure which is being introduced rather than a permanent measure.
If this temporary measure is envisaged, what practical things do I need to consider
Contractual provision for Short time working
An employer should check the employee’s employment contract to determine whether this has been contractually provided for. If short time working is not provided for in the contract and you implement short time working there is a risk in reducing an employee’s pay that he/she may claim breach of contract and that you have unlawfully deducted their wages.
An employer can implement short time working in circumstances where employees have consented, in writing, in advance to the reduction in hours and commensurate pay for those hours worked.
If I intend to place employees on short time working as a result of COVID-19 what must I do?
As an employer you should notify the affected employees in advance of the reduction starts.
There are certain additional considerations which employers may need to consider around communicating and notifying employees of short time working.
If I place an employee on short time as a result of COVID-19 will the State provide any support to those employees?
Employees who are put on 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 is:
- to receive short time work payments an employee must work 3 days per week or less to qualify, having previously been employed on a full-time basis.
- Short Time Work Support is paid for 234 days and is not taxable.
Are there any alternatives I can pursue before lay- offs/short time working or redundancy?
Reduce working hours or pay
Depending the nature and type of business, an employer may look in the first instance to reduce an employee’s working hours or pay. If the employer intends to reduce an employee’s hours or pay, the employer should check what the employment contract allows.
Employers should bear in mind, that where your contract does not permit you to reduce an employee’s hours or pay and an employer does so without their consent, any reduction may amount to an unlawful deduction of wages or could amount to a breach of contract claim.
In order to pursue these alternatives, there are further legal considerations which employers must be mindful of prior to implementing these alternative measures.
Progression to Redundancy if the measure is not temporary
Where lay-off or short time work lasts for four consecutive weeks or more (or an unbroken series of six weeks where all six weeks fall within in a period of 13 weeks) an employee can claim redundancy.
An employee must give the employer notice of their intention to claim a redundancy payment arising from lay-off or short time working. An employer can serve a counter notice challenging the redundancy on the grounds that the lay-off is temporary in nature and in these circumstances due to the outbreak of COVID-19.
Alternatively, an employer may take the decision that the role for which an employee undertakes does not exist and will not exist into the future. If this is the case, a redundancy situation is likely to occur. In those circumstances, the employer would be required to notify the employee of their intention to make the employee redundant. Arising from this, an employee would be entitled to statutory redundancy computed on service with the business.
While due care has been made in drafting this document, it is not to be taken as legal advice. Should you require additional information or assistance on the measures discussed in this briefing, or how to manage the coronavirus in your organisation, please contact one of team listed below:
|Micheál O’ Mullain|