18/03/2021 Briefing

As outlined in our previous briefing COVID-19: Practical Considerations: Updated Employment FAQ the right of an employer to unilaterally place an employee on unpaid lay-off or short-time depends on whether there is an express clause in the contract of employment or whether such a right can be implied on the basis of custom and practice in circumstances of economic downturn or other periods of financial hardship.

Workplace Relations Commission Decision

A recent decision of the Workplace Relations Commission (“WRC”) has addressed this issue in the context of COVID-19. In An Area Sales Manager v An Engineering Company the Adjudication Officer found that the introduction of short-time working arrangements in April 2020 without the claimant’s consent in the absence of an express contractual provision permitting this course of action constituted a breach of the Payment of Wages Act 1991 (the “1991 Act”).

The draft contract of employment initially issued to the claimant by the respondent employer had contained an express unpaid lay-off/short-time working clause. However, this had been removed in the course of pre-employment contract negotiations between the parties at the request of the claimant.

Employer Response to COVID-19

In March 2020, the employer’s business was severely impacted due to COVID-19. Government restrictions on travel prohibited the claimant and his colleagues from travelling to client sites in Ireland and the UK. Consequently, the work available was insufficient to keep the claimant employed on a full-time basis. The employer introduced a suite of measures across all its departments to deal with the challenges posed by the pandemic. These measures included implementing temporary unpaid lay-off or short-time working arrangements or, where suitable, an option to take annual leave or unpaid leave days on a temporary basis.

With a view to securing business continuity and maintaining the claimant’s employment, the employer engaged with the claimant to seek to agree to an alternative working arrangement. The claimant refused the proposed alternative arrangements on the basis that they were not suitable to his circumstances, but did offer to move to a four day week for the month of April 2020.

On 2 April 2020, the employer advised the claimant that there was not sufficient work for either a full-time or four-day week working arrangement. It advised that arising from the reduction in workload, it had no option but to give notice of short-time working arrangements commencing 16 April 2020, for an initial two week period subject to review thereafter.

The claimant worked under protest, asserting that his contract of employment did not contain any provisions dealing with unpaid lay-off and/or short-time working. The claimant ultimately resumed his full-time working hours in September 2020, and made a claim under the 1991 Act in respect of deductions to his salary by the employer.

Employer’s Position in the WRC

The employer submitted that there existed a custom and practice in Ireland generally that temporary lay-offs and short-time work are without pay which constituted an implied term of the claimant’s terms and conditions of employment. The arrangement was temporary in nature, and appropriate advance notification had been given to the claimant. As the employer had given advance notice of the short-time working arrangement and owing to the fact that it had arisen due to a global pandemic, the employer was satisfied that it was invoked in exceptional circumstances following due process.

Pre-employment Contract Negotiations

The Adjudication Officer took into account the exchanges between the parties prior to entering into the employment contract.  It was held that the removal of the express unpaid lay-off/short-time clause from the contract at the request of the claimant could only be interpreted as superseding any term that could have been implied by the WRC into the contract by custom and practice in the circumstances.

As the deduction was not a statutory deduction, was made without the claimant’s consent and did not relate to any term within his contract of employment, the Adjudication Officer held that the deduction was unlawful under the 1991 Act.

Assessment

The claimant in this case was in the fortunate position of having expressly objected to the inclusion of the lay-off/short-time clause in his draft employment contract and secured its removal by the employer.  As a result of these prior contract negotiations, no consideration was given by the WRC as to whether or not a right to put employees on unpaid lay-off/short time could be implied as submitted by the respondent employer.

If there is no express clause in the employment contract permitting unpaid lay-off or short-time working, an employer who imposes such alternative working arrangements may be exposed to claims under the 1991 Act unless it can successfully argue that such a right can be implied by custom and practice in the relevant circumstances.  It remains to be seen what will be the attitude of the employment fora and civil courts to implying such a right in circumstances where the COVID-19 pandemic has undoubtedly given rise to unique and difficult trading conditions and economic hardship for many businesses.