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Covid 19 – A timely reminder of employer obligations in respect of layoff, short time and redundancy

Updates during May:

The first part of May saw a number of developments in relation to returning employees to work including the publication of the  Government’s “Roadmap for reopening society and business” on 1st May and the subsequent publication of the “Return to Work Safety Protocol” on 9th May. For further detail on these developments and employer obligations upon returning employees to the workplace have a look at our recent article “Returning to Work – the New Normal”, available at this link.

Regrettably while many employers prepare for the return of their workforce, for others they are faced with the unfortunate reality that due to a downturn in business caused by Covid-19, they will not be in the financial position to return some or all of their workforce. These employers may have to consider implementing or continuing with periods of layoff or short-time and in some cases employers will have to consider more permanent cost reduction measures i.e. redundancies.

We have set out below some of the primary factors employers will need to consider before implementing or continuing with layoffs, short-time or redundancies.

Layoff:

While the terms are sometimes incorrectly used interchangeably, legally “layoff” and “redundancy” are different.

The term “redundancy” refers to a dismissal whereas the term “layoff” denotes a temporary situation where an employer is not able to provide the work for which the employee is employed to do but the individual remains an employee.  At the time when the employer places an employee on layoff it must be reasonable in the circumstances for that employer to believe the cessation of employment will only be temporary.

Short-time:

Short time refers to a situation where as a result of a diminution in work, an employer reduces the employee’s remuneration or hours to less than half the employee’s normal remuneration or hours. Like layoff, at the time when the employer places the employee on short-time it must be reasonable in the circumstances for the employer to believe that the diminution in work is only temporary.

Legal Issues arising in respect of Layoff/Short-time:

Employers who currently have employees on layoff or short-time or are considering putting employees on layoff or short time, should take note of the below obligations.

Employers should ensure that fair and objective selection criteria are applied in order to choose which employees are subjected to layoff/short-time and which employees are not.

The legislation requires employers to give the employee notice of layoff or short-time. However, it does not specify a minimum period of notice. Employers should still try to give as much notice of layoff or short-time as possible.

Ideally an employer should have a clause in the written employment contract which specifically provides that in the event that the employer has to put the employee on layoff/short-time, the employee will not be entitled to pay during layoff and if on reduced hours or short-time will only be paid for the hours worked. Failure to have this clause in a contract could result in a claim for an unlawful deduction under the Payment of Wages Act if the employer ceases or reduces paying its employees salary during layoff/short-time.

Where there is no such clause in the employment contract, an employer could try to rely on custom and practice to imply such a term into the contract to permit the employer to cease payment. However, an employer would have to be able to refer to layoff or short-time events where employees’ pay was always ceased or reduced. This would be a difficult argument to rely on as an employee’s consent is required for such a reduction in pay.

Alternatively, an employer may seek the employee’s consent to the temporary cessation or reduction in pay as an alternative to redundancy.  

In the ordinary course (i.e. pre Covid-19) if an employee was kept on layoff or short-time for a period of 4 consecutive weeks (or for a period of six weeks in a thirteen week period of which not more than three are consecutive), then in accordance with Section 12 of the Redundancy Payments Acts, 1967-2014, that employee becomes entitled to serve a notice on their employer of an intention to claim statutory redundancy payment.

Upon receipt of this notice of intention to claim redundancy, unless the employer is in a position to promise the employee an early return to work and takes certain specific steps in that regard, the employee will be entitled to redundancy payment.

During Covid-19, however, these ordinary rules allowing employees on layoff or short-time to trigger a redundancy are temporarily suspended. Originally the temporary suspension of these rules was in place from 13th March to 31st May. However, on Friday 29th May, the Government provided some much needed clarity for employers and confirmed the further suspension of these rules until 10th August.

Redundancy:

While layoff/short-time are temporary in nature, regrettably some employers have or will find themselves in situations of having to permanently let some or all of their staff go as a result of the unfortunate impact of the Covid-19 pandemic on their business.

Employers who find themselves in this situation should note the following obligations:

1. Clearly communicate the rationale for the proposed redundancy

Employers should provide the affected employee or employees with a clear explanation of the rationale/reason for the proposed redundancy.

2. Identify the selection pool of “at risk” employees

Where redundancies are to be considered in relation to two or more roles and where there are two or more people doing similar or interchangeable work, the employer may need to consider putting each of those roles at risk of redundancy. This pool of people are then known as the selection pool.

3. Apply fair selection criteria

The employer will need to apply fair and objective selection criteria when deciding which persons from the selection pool will or will not have their employment terminated on the grounds of redundancy. It is important to be careful here that the selection criteria are not in any way directly or indirectly discriminatory on the grounds of age, gender, disability, family status, civil status, sexual orientation, race, religion or membership of the travelling community.

4. Follow a fair and transparent consultation process

Employees with more than one year’s service attract the protection of the Unfair Dismissals legislation and all employees attract the protection of the Employment Equality Acts from day one of their employment.

In order to protect themselves against the risk of successful litigation arising from the redundancy, the employer should ensure to engage in a meaningful and transparent consultation process with each “at risk” employee before any roles are made redundant.

This will usually involve a number of meetings with the employee where the employee is provided with a full opportunity to put forward proposals and input on any potential ways the employee feels the redundancy can be avoided. The consultation process should also involve exploration by both the employer and the employee of any possible suitable alternatives to redundancy including the possibility of finding another role for the employee within the business.

In the event that there are two or more employees at risk of redundancy so that there is a need for a selection pool and selection criteria (as discussed above), then as part of the consultation process the employee must be given a full opportunity to comment and give feedback on any selection criteria and the manner in which it is being applied and/or implemented.

5. Do not pre-determine the process

It is very important to illustrate that no final decisions have been made to proceed with any redundancies until the consultation process has fully concluded and the employee has been given a full and fair opportunity to comment on all of the factors and criteria that will be taken into account by the employer in making its decision as to whether or not to proceed with a redundancy.

6. Employee accompaniment: 

Employees should be given the opportunity to be accompanied to redundancy consultation meetings by a colleague or trade union representative.

7. Document the process:

The WRC, the Labour Court and the Courts will expect a good paper trail in respect of the redundancy process. Employers should ensure to communicate updates to the affected employee(s) in writing at each stage of the process and best practice is to also generate minutes of each of the consultation meetings and circulate these to the employee for comment.

8. Appeal

Depending on the circumstances employers may need to consider offering employees an appeal.

9. Payments to employees arising on redundancy:

If an employee has their employment terminated on the grounds of redundancy they will be entitled to notice. Where the contract reserves the right to do so (or with the agreement of the employee), the employer can pay in lieu of notice.

If the employee has more than two years continuous service then at a minimum they will be entitled to two weeks’ notice or their statutory or contractual notice entitlement whichever is greater.

Employees will also be entitled to any accrued but untaken annual leave.

If the employee has more than two year’s continuous service, then in addition to the above they will be entitled to a statutory redundancy payment calculated as follows:

Collective Redundancy

Employers who believe they may need to make larger numbers of roles redundant within any particular 30 day period, will need to be mindful that this could potentially constitute a “collective redundancy” situation which gives rise to additional obligations. For example in a collective redundancy situation there is an obligation to notify the Minister for Employment Affairs and Social Protection and to enter into a statutory 30 day consultation period with the employees/employee representatives.

The thresholds triggering a collective redundancy situation are outlined below:

Thresholds for triggering a collective redundancy situation
Number of potential redundanciesSize of organisation
521-49 employees
1050-99 employees
10%100-299 employees
30300 or more employees

Key Takeaways:

It is very important for employers to carefully follow due process and fair procedures in every layoff, short-time or redundancy situation.

Taking specialist employment law advice at an early stage in the process can help avoid mistakes which can prove costly down the line. 

Authors: Anne O’Connell and Laura Reid

Dated 30th May, 2020

Anne O’Connell

Solicitors

Fitzwilliam Hall

Fitzwilliam Place

Dublin 2

www.aocsolicitors.ie

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