UK: No Petrol To Pump!

Last Updated: 17 January 2001

The present fuel crisis might not only be causing problems for all road users but also for those employers who are left with employees who have nothing to do, for instance the petrol pump attendant in a petrol station which has run out of supplies or the lorry driver who can’t drive his lorry because he has no petrol left.

Lay Off

In most cases an employee will only be able to claim a redundancy payment if he or she has been dismissed for redundancy. However section 148 onwards of the Employment Rights Act 1996 (ERA) sets out a scheme which allows an employee who has been laid off or put on short-time to claim a redundancy payment provided that he complies meticulously with the statutory procedure. This scheme does not apply at all if the employee has been dismissed (s.151 ERA). Further, it is unnecessary that the employee should be redundant within the statutory definition, but only that he or she should have been laid off or put on short-time for the requisite period.

For the purposes of the statutory scheme, a week of lay-off occurs when an employee whose contractual remuneration depends on his or her being provided by the employer with work of the kind which he is employed to do, is not provided with such work with the result that he is not entitled to remuneration for that week (s147 ERA). If the employee’s remuneration does not depend upon his being provided with work, the lay-off provisions do not apply. This might cover the petrol pump attendant whose contract of employment expressly states that he will be paid £X per week subject to there being petrol with which to fill cars!! Piece workers may also be affected .

A week of short-time working occurs if there is a diminution in the work provided by the employer and, as a result, the remuneration for any week is less than half a "week’s pay" as defined by the ERA (S. 147(2)).

An employee will not be treated as being laid-off if he was not available for work anyway e.g. because of sickness. Nor can an employee rely on any week of lay-off or short time which occurs mainly or wholly as a result of strike or lock-out.

If an employer lays off an employee or puts him or her on short-time without having an express or implied contractual right to do so, this will be a fundamental breach of the employment contract and the employee will be entitled to resign and claim to have been constructively dismissed. If the reason for dismissal was redundancy – which is likely to be the case in a lay-off situation – the employee may claim a redundancy payment in the normal way, thereby avoiding the intricacies of claiming a redundancy payment by way of the lay-off and short-time provisions. A term permitting lay-off will only be implied into a contract if there exists for that employment a custom of laying off which is "reasonable certain and notorious", perhaps for instance in the building trade where a builder can’t work for a few days because of appalling weather conditions.

Unreasonable Lay-Offs

In A Dakri & Co. Ltd v Tissen & ors (1981 ICR 256) the EAT suggested that a contractual right to lay off should be read as being subject to the implied limitation that the lay off be for a reasonable time only, and on the facts a period of 4 weeks was considered the maximum allowable. A lay off for longer than 4 weeks was therefore a fundamental breach of contract entitling the employee to claim constructive dismissal for redundancy.

The Statutory Scheme

The provisions of the ERA governing lay-offs and short-time are complex but the basic features of the scheme are as follows:

  • The employee must have been laid off or kept on short-time for either four or more consecutive weeks, or a total of six weeks (no more than three being consecutive) in any period of 13 weeks (s.148(2) ERA). If the employee has not been laid off or kept on short time for this length of time the scheme will not come into play;
  • The employee must give the employer a written notice of his intention to claim a redundancy payment (an NIC). It need not be in specific terms but must indicate the employee’s intention to claim a redundancy payment in respect of lay-off or short-time. This notice must be given within four weeks of the last of the weeks of lay-off or short-time on which the claim is based (s.148 ERA);
  • If the employer wishes to contest liability, then he must serve a written counter-notice to that effect within 7 days of service of the employee’s NIC (s.149 ERA). The counter-notice must state, as a minimum, that the employer intends to contest any liability for a redundancy payment but does not have to set out the details of the grounds upon which a redundancy payment is opposed;
  • The employer may withdraw a counter-notice by giving a subsequent notice of withdrawal in writing. There is no time-limit for doing this;
  • If the employer has served, and not withdrawn, a valid counter-notice, then the employee must apply to a tribunal to decide the matter (s.149 ERA). Provided the employee has fully complied with the requirements of the scheme, the employer can only defeat a claim at this stage if, at the date of service of the NIC, a period of at least 13 weeks of normal working was reasonably to be expected to begin within the next four weeks (s.152 ERA). The relevant date for this purpose is the date of service of the employee’s NIC. It will not necessarily help the employer if business has picked up and there is plenty of work available at the date of the tribunal hearing, which may be several months after the date of the NIC. The defence is only available to an employer if he has served a valid counter-notice;
  • Finally, the employee must terminate his contract of employment by giving either one week’s notice or contractual notice – whichever is the longer (s. 150)(1)-(2). This notice must be given within 3 weeks of the employer’s failure to give, or withdrawal of, a counter-notice; or, if the case has been contested, within three weeks of the employee being notified of the tribunal’s decision (s.150(3)).

Calculation Of Redundancy Payment

If the employer does not serve the counter-notice or serves one and then withdraws it, then, provided the employee has followed the statutory procedure and the lay-off or short-time was not mainly caused by a strike or lock-out, he will be eligible for a redundancy payment as if he had been dismissed for redundancy and will be subject to the normal qualifying conditions for a redundancy payment. For these purposes, the period of qualifying service is calculated up to the last day of the weeks of lay-off or short-time on which the employee is relying (s. 153 ERA).

If the employee has followed the statutory procedure and the employer has served a counter-notice the issue must be decided by a tribunal. At this stage only one defence remains for the employer. This is that at the date of service of the employee’s NIC, it was reasonably to be expected that the employee would, not later than four weeks after that date enter into a period of employment with the same employer of at least thirteen continuous weeks, during which he or she would not have been laid off or kept on short time for any week.

Guarantee Payments

The right to a guarantee payment arises under section 28(1) of ERA. The right to a payment arises where an employee is given no work to do during his normal working hours on any day. The right depends upon a qualifying period of one month’s continuous employment ending with the day before that for which the guarantee payment is claimed (s 29(1) ERA).

The right is to a guarantee payment, calculated according to the ERA for every workless day as defined (s 28). The purpose of the enactment is to compensate the employee for the loss, through no fault of his own, of what he would have earned in normal circumstances. The maximum payment for any day is £16.10 and the maximum number of days for which payment may be claimed 5 days in any one period of three months.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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