Lay Off, Short Time and the Right to Redundancy Payment

The downturn in the economy has meant that more workers are now experiencing the insecurity of either being laid off or put on short time for longer and more frequent  periods of time. There is understandable confusion on the difference between the terms. The accrual of the resulting right to claim redundancy is also a tricky area. This month we will endeavour to show how under the Redundancy Payment Acts, a right to redundancy arises not only where an employee is dismissed by reason of redundancy but also where such a right may arise in certain circumstances of lay off and short time working.

What is the difference between lay off and short time?

Lay off means what it says on the tin in that an employee is laid off usually because of a downturn in business but should be for a temporary period only so as to distinguish it from full blown redundancy.  Short time occurs where an employee’s hours of work are reduced to less than half of his/hers normal weekly hours or pay.

In both situations the employer must give notice to the employees of the situation and stipulate that it is for a temporary period only. The belief that the lay off or short time  is temporary, and not some subterfuge to avoid paying redundancy payments or educing labour costs , must be honestly held and can be scrutinised under the “reasonable man” test i.e. an objective test by a Court or Tribunal as to what the reasonable employer would do under the circumstances. When selecting employees for lay off or short time, the employer must use the yardstick of  fairness and must be cognisant also of the obligations under the Employment Equality Acts. Part A of Form RP9 is usually served by the employer on the  employee as notice of temporary short time or lay off.    

Can an employer lawfully deduct wages during lay off or short time periods?

It can be argued, and is regularly argued by trade unions, that unless there is an explicit clause in the contract of employment allowing for such deduction or lay off period, or in the alternative there was express consent from the employee for the lay off or short time working, any deduction in wages may be unlawful under the Payment of Wages Acts 1991. Alternatively the employer can argue in defence that it was custom and practice within that particular workplace to lay off staff or put them on short time. The employer, when arguing that point, must prove that such practice was certain, reasonable and within the knowledge of the employees. If you do find yourself in such a situation then the union representative should be contacted immediately for more clarity on this.

How does the entitlement to redundancy arise in short time working or lay off situations?

If an employee has been on short time (less than half wages),  or been laid  off, for four or more consecutive weeks, or for a period of six or more weeks within a period of thirteen consecutive weeks, the employee can give  notice in writing of the intention to claim redundancy on the expiry of that period or in any event not later than four weeks after the cessation of lay off or short time. Bear in mind however that it is statutory redundancy only and the employee also loses the right to statutory notice. This is a very grave step to take, especially in recessionary times when the opportunity for re-employment elsewhere is slim and should really only be considered after serious thought and in consultation with the union representative.

Can the employer give counter-notice to avoid paying redundancy?

Yes. If the employer receives notice from the employee of the intention to claim redundancy, as outlined above, he can give counter notice to the employee informing him/her that there will be a commencement of work not later than four weeks from receipt of the employee notice. The employer counter notice must give notice of continuous employment for a period not lasting less than 13 weeks.

How long can a temporary lay off or short time last?

Unfortunately, the answer to this question is as clear as the answer to the question as to “how long is a piece of string?”. Some may argue that a period can stretch indefinitely as the Redundancy Payments Acts do not stipulate a given period. In one High Court case, a judge suggested that such a period may well extend beyond a twenty six week period There is no doubt that some employers seek to exploit the situation and may extend periods in lieu of paying redundancy, or use it as a mechanism to reduce wage costs . The employee is understandably caught in a bind between opting to claim redundancy, which has the effect of terminating the employment, or continue to suffer in the hope that things might pick up. The law does not adequately address such situations and workers frequently find themselves in this  limbo. Early Union intervention is vital in such circumstances so that an industrial relations solution may be explored.