Norwegian’s decision to temporarily lay off thousands of staff is a logical if drastic response to the crisis engulfing the global airline industry as aircraft are grounded, sweeping travel bans are introduced and passengers cancel bookings – all in response to the Covid-19 coronavirus outbreak.
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The low-cost operator has taken the most radical action so far among carriers; most others have taken action such as offering unpaid leave and executive pay cuts.
But it won’t be just airlines looking at how they can slash short-term costs. The hospitality industry is also massively exposed to the outbreak of the covid-19 coronavirus and so are manufacturers whose supply chains have been disrupted, as seen with JCB last month.
Retailers, too, could look to close stores and lay off employees as stocks deplete and customers move online en masse to avoid social contact.
Acas advice states that “there is a general right in common law to tell most employees not to turn up for work but there is no general right not to pay them because work is not available”.
Laying off employees can generally only be done under an agreement covering the issue between the company and the union, or a national agreement for the industry in question. But such an agreement must be incorporated into employees’ contracts for it to have any force.
Acas adds that the right of an employer to lay may also be “implied” if evidence shows that such a right has been established over a long period by custom.
In sectors less well prepared for crisis of the scale of the coronavirus outbreak, businesses may find themselves in a difficult situation when it comes to lay-offs, says Patrick Glencross, senior associate at law firm Cripps Pemberton Greenish: “A company may have the right under employment contracts to lay off its staff temporarily due to a shortage of work. This contractual power is often found in the manufacturing sector, but not commonly in other sectors. Unless the company has this contractual right, any attempt to impose lay-offs will give rise to potential claims for breach of contract, unlawful deductions and constructive dismissal.”
“Employees may, however, consent to a period of unpaid leave in this situation, similar to an unpaid sabbatical, particularly if this option is presented as an alternative to the risk of redundancy dismissals.
Businesses are obliged to pay staff, Glencross added, but the level of payment is low: “Staff who are compulsorily laid off are entitled to receive a statutory ‘guarantee payment’ for workless days, of up to £29 per day and limited to five days in any three-month period.
“A lay-off for four or more consecutive weeks also entitles an employee to claim a statutory redundancy payment in certain circumstances.”
Andrea Finn, partner, employment at Simmons & Simmons, tells Personnel Today: “Rules governing lay-offs differ greatly between countries. International airlines will have to make separate agreements according to the country. In the US, the airline industry is heavily unionised and there will be agreements in place.”
In the UK, the need for temporary lay-offs has been understood for many years, she says. “It’s old, longstanding law. Although we haven’t seen this recently in the UK; it’s not new, particularly in manufacturing.”
In many cases, employees will be asked to operate reduced hours in a bid to avoid redundancies, temporary or permanent. XpertHR advises that organisations cannot impose shorter hours on an employee without their agreement. Any change to an employee’s hours of work can only take place where there is agreement on both sides.
It states that where agreement is reached to reduce an employee’s working hours for a defined temporary period, the organisation will confirm the relevant changes in writing. This written confirmation will state the exact hours to be worked, the start and end date of the term that varies with the employee’s contract and details of how pay will be affected.
“At the end of the agreed period of reduced working hours, the employee will return to their previous working hours,” reads the guidance.