As the negative impact on businesses caused by the Covid-19 pandemic continues, Deirdre Crowley, Partner, Matheson and Susan Doris-Obando, Senior Associate, Matheson look at alternatives to redundancies.

Lay-off and short-time working ⚓︎

An employee may be placed on a period of lay-off where, subject to the conditions set out in the Redundancy Payments Acts 1967 to 2014 (“RPA”), his or her employer is unable to provide the work for which the employee is paid, and it is reasonable in the circumstances that the employer believes that the cessation of employment will not be permanent and the employer gives notice to the employee prior to the cessation.  There is no statutory minimum timeframe in relation to such notice, but it is advisable that an employer gives as much notice as is reasonably possible in the circumstances.

The RPA provides that an employee is deemed to be on short-time where his/her hours of work or remuneration are less than half of their normal weekly amount by reason of a diminution in the work provided by the employer.  The employer must give notice to the employee prior to the reduction and the employer must have a reasonable belief that the diminution will be temporary.

There is no general right to lay-off employees or put employees on a period of short-time without pay.  Accordingly, in the absence of an express clause permitting lay-off or short-time without pay or in the absence of an implied right established by way of custom and practice, prior agreement from the employees should be obtained (whether express or implied).

Where no such consent is obtained, there is a risk that the employees could claim for unlawful deduction of wages under the Payment of Wages Acts 1991 (“PWA”), breach of contract or constructive dismissal.

Employers should consult with employees (and / or their representatives, if any) and explain that an alternative may be redundancies, if that is the case.

Can employees claim an entitlement to a statutory redundancy payment where they are placed on a period of lay-off or short-time? ⚓︎

The RPA specifically provides that if an employee has been laid off or put on short-time for four or more consecutive weeks; or, six or more weeks within a 13-week period (of which not more than three are consecutive), the employee may notify their employer in writing of his or her intention to claim a statutory redundancy payment.

The employee must satisfy the qualifying criteria for eligibility for a statutory redundancy payment, including having at least two years’ continuous service with the employer.  The notice must be given, at the latest, within four weeks after the lay-off or short-time has ended, and within seven days of the employee issuing this notice, the employer can give a counter notice contesting its liability to pay a redundancy payment.  This applies if it is reasonable, in the circumstances, to expect that within four weeks of the employee’s notice, the employer will provide the employee with work for at least 13 weeks without being placed on a period of lay-off or short-time for any week.

However, the Emergency Measures in the Public Interest (Covid-19) Act 2020 amended the RPA to suspend, from 13 March 2020 to 31 May 2020, the entitlement of an employee to make this notification to his or her employer. This is limited to circumstances where the employee has been placed on a period of lay-off or short-time due to the impact of the measures taken by his or her employer in compliance with or as a consequence of the Government’s response to prevent, limit, minimise or slow the spread of COVID-19.  This has been extended on a number of occasions, with the current extension ending on 30 November 2020.

Implementing salary reductions or reduction in hours ⚓︎

Implementing salary reductions or reductions in hours (whether than by less than half for short-time working or otherwise) would be considered a material change to an employees’ terms and conditions of employment and accordingly, would necessitate obtaining the consent of employees (which can be express or implied).  This is the case even where the employee’s contract has a general variation clause permitting changes to the terms of the contract as any discretion to vary employment terms must be exercised reasonably and not in a manner which is oppressive on the employees.

Obtaining express consent is the safest and most effective strategy for implementing salary reductions or reduction in hours.  Express consent (if given) should be evidenced by way of a side letter to the employment contract that is signed and returned by an employee.  Before seeking express consent, the employer should consult with employees (and / or their representatives, if any) and explain that one alternative may be redundancies, if that is the case.

Alternatively, it is open to an employer to rely on implied consent evidenced by the employee continuing to work and not objecting.  Again, an employer should consult with employees before relying on implied consent to implement the salary reduction or reduction in hours.

In the absence of consent, if an employer attempts to implement salary reduction without consultation or express or implied agreement with employees, it may risk claims for an unlawful deduction from wages, breach of contract or constructive dismissal.

Voluntary redundancies ⚓︎

There are no particular procedural or notice requirements required to implement a voluntary redundancy programme.  An employer has broad discretion to determine the scope of eligibility for voluntary redundancy provided the application of the programme is not discriminatory (directly or indirectly).

An employee can be awarded compensation of up to two years gross remuneration for direct or indirect discrimination – based on financial and non-financial loss (injury to feelings).

To reduce discrimination risks, it is best to apply clear, justifiable objective criteria (which are less likely to be challenged as discriminatory).

The employer should ensure that it reserves the right not to accept an applications for voluntary redundancy including if there are more applications than the proposed number of redundancies or if it is in the long-term interests of the business to retain the employees.

The numbers of voluntary redundancies should be taken into account in determining whether the specified minimum numbers of redundancies are triggered for collective redundancy purposes.  If no compulsory redundancies are proposed and there are no target numbers of voluntary redundancies, then they may not need to be taken into account for these purposes.

Any package offered under a voluntary redundancy program should be offered under a compromise agreement under which the employee waives all employment claims against the employer.

In voluntary redundancy situations, employers typically advise employees that there may be compulsory redundancies in the future.  The benefit of being upfront with employees is that more employees may choose to take the voluntary redundancy payment, particularly where the voluntary redundancy payment is attractive and higher than the likely payment for compulsory redundancy.

Rehiring after redundancies ⚓︎

It is open to an employer to rehire after making redundancies.  However, in such circumstances, an employee involved in the redundancy situation, may seek to challenge that redundancy was the real reason for dismissal or that fair procedures were not followed and claim unfair dismissal (in circumstances were a compromise agreement was not been entered into).  The limitation period for such a claim is 6 months or 12 months if there is reasonable cause for delay.  To reduce the risk of an unfair dismissal claim, an employer may choose to run a selection process using objective criteria for applicants.

An employee has no right to receive a statutory redundancy payment if he or she accepts a new contract or reengagement with immediate effect and the terms do not differ from the previous contract.  Equally there is no right to receive a statutory redundancy payment if he or she accepts an offer in writing for a new and different contract which will start within four weeks of the previous contract ending.

Annual Review of Employment Law 2020

Let us save you and your organisation time, money and stress by providing you with detailed updates on the Irish and international employment law developments that you need to know.

Join us this year as Deirdre Crowley will be holding a session on Employer Liability in a Covid-19 World.

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