In this blog, our employment barristers Michael Sprack and Amrit Bachu outline the current legal protections in relation to wage reduction, dismissal and redundancy. Later blogs will examine the latest legislative measures brought in response to the pandemic.
The COVID-19 lockdown has caused a great deal of uncertainty. What is clear is that there will be a profound and lasting impact on the circumstances of almost all workers. In this new and changing context, it is important for workers to bear in mind their relevant established rights, in particular regarding wage protection, dismissal and redundancy. Although these rights are interconnected, we consider in turn their applicability to any given situation.
Wages, notice pay and holiday pay
In response to the economic impact of the pandemic on businesses, some have asked employees to reduce their weekly hours. Most employees have contractually fixed hours. For example, contracts may state “40 hours weekly” or “9:30am to 5:30pm, Monday to Friday”. It is important to begin with contractual rights: an employer is contractually obliged to pay the employee for their full contracted hours. Anything less would be unlawful unless, for example, the deduction is authorised by statute; agreed pursuant to a term in the contract; or by agreement with the employee.
An employer could terminate the contract of employment and offer one with reduced hours, rather like ‘firing and re-hiring’. In such a case, the employer remains contractually obliged to pay an employee’s notice pay, or if no such term exists, the statutory minimum of one week for each year of employment, up to a maximum of 12 weeks. If faced with this situation, some employees may be able to assert their right not to be unfairly dismissed (see below).
In terms of holiday pay, all employees have the right to a minimum of 5.6 weeks’ paid holiday annually. Where paid holiday has been accrued but remains untaken on termination of the employment contract, the employee is entitled to a payment in respect of accrued but untaken holiday leave. For example, if an employee is six months into the leave year but is dismissed prior to taking any leave, the employee will be entitled to be paid a minimum of 2.8 weeks’ accrued holiday pay termination in addition to any wages that are due, including pay for notice.
Individuals who work on zero-hour contracts or who are self-employed do not generally have the right to be paid a minimum number of contractual hours, or to a notice period, or even to paid holiday. However, these may be able to argue that they are in fact employees. Tribunals have, in some cases, decided that workers whose contracts specify that they are self-employed were in fact employees, and that ‘zero-hours’ employees were in fact entitled to fixed hours.
If a financially struggling employer cannot be saved through redundancies, it may wind up through insolvency. That should not deter employees from asserting their rights as in such cases, individuals may be able to recover their notice pay, redundancy payments and arrears in wages from the secretary of state .
Rights in relation to dismissal
- the employer’s reason for the dismissal has to be a ‘potentially fair’ reason;
- the employer has to follow a fair procedure; and
- although the decision to dismiss does not have to be unimpeachable, it does have to be ‘within the band of reasonable responses’ open to a hypothetical reasonable employer.
During the COVID-19 pandemic, some employers may dismiss employees by reason of ‘redundancy’, ‘conduct’ or ‘some other substantial reason’.
A business may seek to make savings to balance against income lost as a result of the COVID-19 lockdown. Where such savings are made through dismissals, the law of redundancy is relevant. In law, the term redundancy has a broad scope, potentially comprising any significant change in the needs of the business for work of a particular kind. Although redundancy is a potentially fair reason for dismissal, not every dismissal by reason of redundancy is fair. The employer must still apply a fair procedure, for example:
- the employer must give as much warning as possible;
- there should be consultation about how management’s desired outcome can be achieved with minimal hardship to employees;
- where there is a selection, fair criteria must be established (e.g. attendance record, efficiency, experience, length of service);
- the employer should consider representations during the selection process; and
- the employer should offer alternative employment where possible.
This last requirement of considering alternatives to dismissal is likely to be particularly important to redundancies as a result of the COVID-19 lockdown. For example, if an employee were to offer to be temporarily furloughed and only receive money paid by the government under the Job Retention Scheme, any refusal by the dismissing employer may render the dismissal unfair. The employee’s offer would effectively be cost-neutral to the employer for the length of the proposed furlough. In other words, it would be hard for an employer to argue that it had to dismiss an employee without furloughing them, when furloughing itself costs nothing. It is worth noting as well that the furlough scheme allows for backdating as early as 1st March 2020 in relation to employees who were dismissed but are in fact eligible for furlough.
It is also important to bear in mind that an employer cannot act in a discriminatory fashion – legally distinct from ‘fairness’. This is particular true as regards indirect discrimination and selection criteria.
Moreover, even where a dismissal for redundancy is fair, an employee is entitled to a ‘redundancy payment’ in addition to any notice and outstanding wages, discussed above. Employees may be eligible for a redundancy payment even if they have not been dismissed, but rather have been working reduced hours or been temporarily laid off.
Dismissal for other reasons
On the other hand, what if an employee with a health condition refused to attend work because of their risk to COVID-19? There are several pitfalls to an employer considering dismissal based on the employee’s capability or conduct, particularly in relation to ‘automatic unfair’ dismissals:
- A dismissal is ‘automatically unfair’ if an employee, or where applicable the designated employee, brings to an employer’s attention circumstances connected work which the employee reasonable believes to be harmful or potentially harmful to health or safety.
- A dismissal is ‘automatically unfair’ if it is in response to an assertion by an employee that the employer has breached a ‘relevant statutory right’.
- More generally, an employer is under a duty to ensure that the employee’s working conditions are safe (this is a term, implied by law, into all employment contracts).
In addition to the duty to treat each potentially redundant employee fairly, as described above, there are also specific duties requiring employers to consult a wider pool of employees in circumstances where:
- The employer is proposing to make redundant 20 or more employees;
- within 90 days; and
- at one ‘establishment’.
In these circumstances, the employer is required to begin a consultation process at least 30 days before the first dismissal takes effect (or 45 days where more than 100 employees are facing redundancy). The employer must disclose in writing to selected employee representatives  a number of factors to assist in the consultation, such as: the reasons for the proposals; the method of any selection; details of agency workers, etc. Where an employer fails to comply with these duties, a tribunal can order the employer to pay to an employee up to 90 days’ pay as a protective award.
The complex interplay between different types of rights and individual circumstances mean expert advice as early as possible can help their chances of success. In all cases, it is important for employees and workers to act swiftly because claims in the Employment Tribunal for wages, discrimination and most dismissal based claims have a strict deadline of 3 months less one day from the last ‘deduction in wages’ or ‘dismissal’ or ‘last act of discrimination’, by which time the Claimant must have entered into ACAS Early Conciliation.
In forthcoming blogs, we examine discrimination, as well as the recent legislative and administrative measures brought in response to the COVID-19 pandemic, and the impact these will have on employee-employer relations.
Date: 8th April 2020
Please note this blog is not legal advice. It is a platform to share knowledge with employees and workers, as well those who assist them. If you require formal advice on similar problems or specific circumstances, please contact our clerks on 020 7452 8900.