Hours reduced, no furlough and no communication for months

Breach of contract

The first thing a tribunal or court will do is consider the contractual position.  Most employees do not have an implied right to be provided with work, but do have an implied right to be provided with pay.  So when an employer lays off (or puts on short-time working) an employee without pay, without having reserved the contractual right to do so, it is the non-payment which is likely to give rise to the breach of contract rather than the failure to provide work.

Understanding the contractual position is important because it affects the employee’s contractual and statutory rights. It will constitute a breach of contract for an employer to lay off employees or put them on short-time working without pay when they do not have an express or implied contractual right to do so.  Some employers anticipate the need to lay off employees or to put them on short-time working by including an express right to do so in their employment contracts.  Other employers operate within industries where, through custom and practice of laying off employees or putting them on short-time working, the employer has an implied right to do so.  However, for a term allowing lay-off to be implied into a contract, there must be a custom of laying-off within that particular business, the custom must be reasonable, certain and notorious and such that “no workman could be supposed to have entered into service without looking to it as part of the contract”.  This is a strict test and an employer should be confident they can satisfy it before they rely on an implied term to lay off employees.  If the contract does not permit lay-off or short-time working, the employer will be in fundamental breach of contract entitling the employee to resign and claim constructive dismissal (if they have the required two years’ continuous service.

Where an employer lays employees off or puts them on short-time working, without the contractual right to do so, an employee’s options are:

• Choose to accept the breach of contract and treat the contract as continuing, while claiming a statutory guarantee payment.
• Sue for damages for breach of contract in the civil court or, in certain circumstances, at an employment tribunal.
• Claim before an employment tribunal that there has been an unlawful deduction of wages under Part II of the ERA 1996.
• Claim that the employer’s action amounted to a dismissal (constructive or otherwise), giving rise to potential claims for unfair dismissal and/or redundancy pay.

If the employee decides to resign and claim constructive dismissal and the reason for dismissal is redundancy (which is probable in this situation), the employee may also claim a statutory redundancy payment via the normal route.

If an employer keeps employees on lay-off or short-time working merely so that they can avoid making statutory redundancy payments, it is possible for the employee to claim that this is a breach of the implied term of mutual trust and confidence, entitling them to resign and claim constructive dismissal where they have been laid off or kept on short time working for an unreasonably long period without pay where there is no genuine prospect of work. An employee who is constructively dismissed will be entitled to damages for breach of contract. However, they are required to have two years’ continuing service with the employer.  If an employee does not have the required two years’ service, a claim for breach of contract can also be brought in the civil courts.    Unlike the constructive dismissal route, there is no qualifying period of service for a breach of contract claim and it can be brought in either the employment tribunal (subject to a cap of £25,000 on any award) or in the civil courts. The principle of damages in a constructive dismissal claim or breach of contract claim is that the employee should be put in the financial position they would have been in had the employer not breached the contract. Therefore, presuming that the employee resigned without notice, the starting point for the measure of damages will usually be the value of their net remuneration package for their contractual notice period.

The time limit for bringing a claim for constructive dismissal/breach of contract in the employment tribunal is three months less one day from the date of the breach.

Unfair Dismissal, Collective Consultation and Unlawful Deduction from Wages

It is unclear from the information above whether the employer has effectively dismissed the employee, but their conduct/words in telling her to apply for her P45 would point toward this being the case.  If she has been dismissed on the grounds of redundancy, the employee may have a claim for unfair dismissal in that the employer has failed to follow a fair or any procedure.  If there were more than 20 employees made redundant and the employer has failed to follow the collective consultation process, the employee may also have a claim for a protective award under s.188 TULR(C)A 1992 as well as a claim for unlawful deductions from wages in respect of the unpaid wages from May 2020.

The time limit for bringing claims for unfair dismissal is three months less one day from the date of the dismissal.

In respect of claims for failure to comply with the consultation process, a complaint must be made either before the last of the proposed dismissals takes effect or within the period of three months starting with the day on which the last dismissal occurs.

A claim for unlawful deduction from wages must be made within three months less one day of the date of the last deduction in a series of deductions.

Statutory Redundancy Payment

Where an employer exercises an express right to lay off an employee or to put them on short-time working, in certain circumstances, the employee becomes entitled to claim a statutory redundancy payment. Those circumstances are as follows:

1. Where the employee satisfies the qualifying conditions to bring a claim because they have the required length of service (at least two years) and;
2. Have been laid off or kept on short-time working for at least four or more consecutive weeks or a total of six weeks (of which no more than three are consecutive) in any period of thirteen weeks.

The employee must also follow the procedures in the statutory scheme, including serving a notice of intention to claim a statutory redundancy payment in respect of lay-off or short-time working. If an employee serves such a notice, an employer has only one substantive defence open to them and can serve a counter notice on the basis that it reasonably expects that within four weeks of the date of service of the employee’s notice of intention to claim, work would pick up again enabling the employee to continue working for them.

There are very strict requirements to comply with under the statutory scheme. It is therefore strongly recommended that the employee takes proper legal advice before engaging the process to avoid any claim being contested as a result of the requirements of the statutory scheme not being satisfied.

In the event of a successful claim, the amount of redundancy payment is calculated in the usual way, having regard to an employee’s age, length of service and weekly pay. There is a redundancy calculator on the government website here – https://www.gov.uk/calculate-your-redundancy-pay – which should give the employee an idea of how much they are entitled to. For employees claiming a statutory redundancy payment following lay-off or short-time working, there are other statutory provisions to consider in determining the relevant reference periods and the employee must seek proper legal advice in relation to this. It is also important to note that for furloughed employees, the relevant pay for redundancy payment purposes is the employee’s normal pay pre-furlough and not their reduced furlough pay.

Please note that an employee will lose their right to a statutory redundancy payment unless one of the following four events occurs within the six-month period beginning with the relevant date:

• The payment is agreed and paid by the employer.
• The employee makes a written claim for payment to the employer.
• The employee’s right to a redundancy payment (or the amount of the redundancy payment to which they are entitled) is referred to an employment tribunal.
• The employee presents a claim of unfair dismissal to an employment tribunal.

Given the time limits and the fact that she has been not been paid since May 2020, we therefore recommend that the employee makes a written claim for payment to the employer immediately and commences the Early Conciliation process through ACAS with a view to commencing an employment tribunal claim for a Statutory Redundancy Payment.  She will also have to consider whether has been dismissed and wishes to pursue a claim for unfair dismissal and unlawful deduction from wages (for the period she was not paid).  If she has not been dismissed, she may consider resigning to pursue claims for constructive dismissal (if she has the required two years’ service) and/or breach of contract in the Tribunal or civil courts.  If she does pursue claims in the Tribunal other than a claim for a statutory redundancy payment, she should complete the Early Conciliation process in respect of these claims also.

*Samantha Tanney assisted with this advice.

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