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COVID-19: Lay-Off and Short-Time

This article is the second in a series aimed at assisting businesses through the current unprecedented COVID-19 situation. On this occasion Shane Costelloe discusses lay-off and short-time and sets out guidance based on questions that have arisen in the marketplace. The first in the series COVID-19: Practical Steps for Employers can be viewed here.

Introduction

With a daily escalation of economic and social uncertainty for the people of Ireland, business owners and management teams have tough corporate decisions to make. When faced with a potential decrease in turnover, decision makers within businesses will need to cut costs in order to survive, and for most businesses their greatest overhead is personnel. Unfortunately, it may be inevitable that businesses consider if a temporary or permanent adjustment of staff numbers is required. Whilst we will look at redundancy in a future article, the purpose of this briefing is to inform employers on the process of implementing a lay-off or short-time restructuring of staff through a selection of FAQs.

FAQs from the Marketplace

1. What is the difference between lay-off and short-time? I have heard both terms used for what seems to be the same situation.

A lay-off situation arises where an employer is unable to provide any work for an employee. A short-time situation arises where, due to a reduction in the amount of work to be done, an employee’s weekly pay is less than half his or her normal weekly pay or the hours worked are reduced to less than half the normal weekly working hours. Both scenarios are intended to be temporary and are provided by way of the Redundancy Payments Acts 1967–2014.

2. Do I need a reason to put my staff on lay-off or short-time?

Lay-off or short-time arise when there is a lack of work available for employees or the financial circumstances of the business require a temporary reduction in personnel. The current uncertainty brought about by COVID-19 is a legitimate, and likely necessary, reason to consider such temporary reductions. Best practice is to provide confirmation of the lay-off period to the employee in writing and an employer should give a copy of the Form RP9 to employees when they are being laid off.

3. Do I need to inform my staff in advance?

In short, yes. The Redundancy Payments Acts 1967–2014 state that “reasonable” notice must be provided to employees facing lay-off or short-time. The serving of such notice is likely to prove an issue for employers in the current climate due to COVID-19. Often the length of notice required is set out in an employee’s contract of employment, however in the current climate employers may be forced to lay-off or put staff on short-time, or indeed close premises, with little or no notice.

Employers should first check contracts of employment together with policies and procedures (often set out in the Employee Handbook) to confirm the required notice period.

4. Do I simply select who I want to place on lay-off or short-time or do I need to invoke a procedure? I was previously advised to apply a “fair” procedure but that was in the case of a redundancy.

When selecting employees for lay off or short-time working an employer should apply the same standard of selection criteria as for redundancy. The criteria should be objective, reasonable and applied in a fair manner. For example, the custom and practice in the workplace may be last in, first out, or the contract of employment may set out criteria for selection. Under employment equality legislation, the selection must not discriminate against employees on any of the following 9 grounds: gender, civil status, family status, age, disability, religious belief, race, sexual orientation or membership of the Traveller community.

When an employer determines that a particular role or roles are being considered for lay-off or short-time a pool of comparable employees should be established. Choosing employees from this pool should then be made by use of a selection matrix where employees should be assessed under objective criteria including, for example, qualifications, responsibilities, performance history, skills in using relevant technology and contribution to the workplace. The broader the criteria used to determine employees’ suitability for selection, the more objective the process is likely to be adjudged.

5. Are employees paid during a period of lay-off or short-time?

At common law an employer cannot unilaterally place an employee on unpaid lay-off or short-time working with reduced pay unless there is an express contractual right to do so. Unless there is an explicit clause in the contract of employment allowing for a deduction or cessation of pay during a lay-off period, or it is established by the employer that an implied right to do so exists as a result of custom and practice within the organisation, or the relevant industry as a whole, any deduction in wages may be unlawful under the Payment of Wages Acts 1991. Of course, express consent by an employee will also suffice to render the unpaid lay-off or short-time legitimate in the absence of an explicit or implied right to do so.

In this time of unprecedented business disruption, it is considered unlikely that an employee will challenge the lay-off or short-time arrangements due to the fact that the only alternative to doing so may be the redundancy of the employee’s position.

6. I feel terrible that I am not paying my staff but I simply cannot afford it. What supports, if any, do they receive from the Department of Employment Affairs and Social Protection?

The Department of Employment Affairs and Social Protection has confirmed that employees who are laid off temporarily as a result of COVID-19 can apply for a Jobseeker’s Payment via their local Intreo Centre.

Short-time Work Support is available under Jobseeker’s Benefit and is an income support payment for employees who have been temporarily placed on a shorter working week, due to business challenges affecting their employment. The payment is made in respect of the employee’s regular salary for the days that they are no longer working. For example, where an employee’s working week has been reduced from a five-day work pattern to a three-day work pattern, they can receive Short-time Work Support for the other two days. Employees must work 3 days per week or less to qualify, having previously been employed on a full-time basis.

Entitlement to the Short-time Work Support is based on the employee’s social insurance contribution (PRSI) record. Employees must meet the following PRSI conditions:-

  • Employees must have paid at least 104 weeks of class A, H or P PRSI (most private sector workers pay class A); or
  • Have paid at least 156 weeks of class S PRSI and have 39 weeks of PRSI contributions from insurable employment in the relevant tax year (this is the second last complete tax year before the year in which the claim is made); or
  • Have 26 weeks of PRSI contributions from insurable employment in the relevant tax year and 26 weeks of PRSI in the year before the relevant tax year.

Short-time Work Support is not means tested. Where an employee’s days of employment are reduced but they do not have sufficient PRSI contributions to qualify for the Short-time Work Support, they may be eligible for Jobseeker’s Allowance, which is a means tested payment.

The Government is to establish a temporary refund scheme for employers forced to cease trading as a result of social distancing measures to help delay the spread of COVID-19. Where possible, employers are being asked to pay workers at least the equivalent jobseekers’ rate of €203 per week during a six-week period. The Department of Employment Affairs and Social Protection said employers can claim a refund for the payments under the temporary scheme. This new temporary refund scheme, will be available to all employees and the self-employed who have lost work as a result of the COVID-19 pandemic. The Department has said employers can claim a refund for the €203 a week payments to workers. Individuals applying for the payment will have to apply for normal jobseeker’s payments within the six week period – a simplified application will be available on the Department’s website. Once that is received, the Department will process the claims and reconcile payments. Unfortunately, refunds are expected to take some time to process and such a delay may be a deterrence for businesses to adopt the scheme.

7. How long can I have my staff on lay-off or short-time?

If a lay-off or a short-time situation exists and has continued for 4 weeks or more, or for 6 weeks in the last 13 weeks, an employee is entitled to serve a notice on an employer in writing of his or her intention to claim redundancy under the Redundancy Payments Acts 1967-2014, assuming they satisfy the qualifying criteria, for example, having at least 2 year’s continuous service. The notice must be given at the latest within 4 weeks after the lay-off or short-time has ended.

Within 7 days of the employee’s notice, the employer can give counter notice contesting liability to pay a redundancy payment. This applies if it is reasonably to be expected that within 4 weeks of the employee’s notice the employee will be permitted to work for at least 13 weeks without being laid off or placed on short-time for any week. Again, given the unprecedented nature of the COVID-19 virus and the risk as expressed in some scientific circles that it may hit in further waves, it may be difficult for employers to give this assurance to employees.

If an employee does not wish to claim redundancy but the lay-off or short-time situation continues, the question arises as to whether it is a temporary situation. If it becomes apparent that it is no longer temporary then the situation is now a redundancy rather than a lay-off or short-time working. It is the employer who initially decides whether or not there is a redundancy situation.

8. My workforce is made up of employees and contractors. Are contractors affected by lay-off and short-time legislation also?

Contractors are not, by their nature, employees in the eyes of the law. The particular terms of their engagement will be set out in their contract for services. In short, contractors are separate entities that are paid for the services they deliver to their client (your business). If they are no longer providing services then, subject to any specific terms in their contract existing in the alternative (for example a retainer), it would follow that they are not entitled to charge for those services. Contractors may be able to deliver services by working from home and if so should continue to be compensated according to the level of service delivered in accordance with the agreement between them and the company. The temporary refund scheme referred to in FAQ 6 above does appear to apply to self-employed individuals – so businesses do, as a sign of goodwill, have the option to continue paying contractors €203 per week even where services are not being provided.

Conclusion

At Holmes O’Malley Sexton we recognise that the decision for employers to reduce workforce numbers or hours worked is an extremely difficult one but when faced with the prospect of permanent business closure, applying a temporary solution through lay-off or short-time may be the only viable option.

Our employment team is here to help business owners and management through this difficult period and we have put a continuity plan in place to guarantee uninterrupted availability of support. Please do not hesitate to contact Shane Costelloe (Associate Solicitor), Pat McInerney (Partner) or any of our partners or solicitors if you require guidance and advice.

2020-04-28T15:51:01+01:00March 16th, 2020|Publications|

About the Author:

Shane Costelloe is an Associate Solicitor in our corporate and commercial department and joined the firm in 2012. Shane deals with commercial agreements and advices, corporate matters, mergers & acquisitions, […]

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