Reduced working hours

Increasingly the news is filled with dire financial forecasts, warning that businesses of all sizes are at risk. Many organisations are re-assessing their business plans and planning for the worst, reducing their overheads and considering the long term future of the business. One option which has been attracting headlines nationwide is to ask employees to reduce their hours, to ease the pressure on cash flow and strengthen the business in turbulent economic conditions. To many employers this is preferential to having to make redundancies, by allowing every employee to carry on working. However making such a decision opens your business to a range of potential legal problems.

The employer cannot force an employee to reduce their contractual working hours – the employee has a contract and is entitled to rely on the terms of that contract, irrespective of the effect that this will have upon the employers business. The contract can be varied by agreement only. Of course if an employee refuses to reduce their working hours, the employer must consider the alternative options available to them, such as redundancy or restructuring, but such action cannot be used to force the employee into accepting reduced working hours.

If the employer chooses to overrule any objections raised, and insists that all employees reduce their working hours, they should be prepared for the ramifications. Employees may decide to enter a formal grievance, as the employer has broken the contract of employment. This is regarded as a breach of contract and exposes employers to the risk of constructive dismissal claims from employees. New compensation limits that came into force on 1st February 2017 now mean that the maximum award an Employment Tribunal can make in a case for constructive dismissal is £76,700 illustrating how expensive incorrectly handled money saving ideas can be!

It is worth bearing in mind that if an employee lodges their grievance but continues to work under protest they will still be able to sue for the difference in wages. Such employees would have six years from the date of the breach of contract in which to commence legal proceedings. As an employer, this can be an expensive liability to have outstanding for such a period of time.

Even employers who have the contractual right to vary their employees working hours,puttingthem on ‘short-time’ when work is unavailable, must act cautiously to avoid the pitfalls of the statutory scheme in which employees on short-time working may become eligible to claim a redundancy payment.

To minimise such risks, it is recommended that employers seek legal advice and consider a ‘cards on the table’ approach before taking any action in relation to employee working hours or variation of contractual terms.

Not only would this allow employers to consider all the options available to them, and the implications of these decisions, but the overall cost to the business of obtaining professional advice is likely to be much less than that incurred dealing with protracted legal proceedingsand potential damages.

The ‘cards on the table approach’ will allow a full and frank exchange of ideas and give employees a clear indication as to why the employer wishes to alter working hours and how long they anticipate this step will be necessary for.This will maintain the working relationship and minimise the risk of any animosity arising, as the employee’s will see that the decision is being considered as a necessity rather than simply a cost saving exercise. In addition, employees may also be able to offer additional cost-saving suggestions that employers may not have considered and provide a positive input into maintaining the longevity of the company.

Newsletter articles

March 2017 – Reduced working hours – can I put my staff on a shorter working week?

Increasingly the news is filled with dire financial forecasts, warning that businesses of all sizes are at risk. Many organisations are re-assessing their business plans and planning for the worst, reducing their overheads and considering the long term future of the business. One option which has been attracting headlines nationwide is to ask employees to reduce their hours, to ease the pressure on cash flow and strengthen the business in turbulent economic conditions. To many employers this is preferential to having to make redundancies, by allowing every employee to carry on working. However making such a decision opens your business to a range of potential legal problems.

The employer cannot force an employee to reduce their contractual working hours – the employee has a contract and is entitled to rely on the terms of that contract, irrespective of the effect that this will have upon the employers business. The contract can be varied by agreement only. Of course if an employee refuses to reduce their working hours, the employer must consider the alternative options available to them, such as redundancy or restructuring, but such action cannot be used to force the employee into accepting reduced working hours.

If the employer chooses to overrule any objections raised, and insists that all employees reduce their working hours, they should be prepared for the ramifications. Employees may decide to enter a formal grievance, as the employer has broken the contract of employment. This is regarded as a breach of contract and exposes employers to the risk of constructive dismissal claims from employees. New compensation limits that came into force on 1st February 2017 now mean that the maximum award an Employment Tribunal can make in a case for constructive dismissal is £76,700 illustrating how expensive incorrectly handled money saving ideas can be!

It is worth bearing in mind that if an employee lodges their grievance but continues to work under protest they will still be able to sue for the difference in wages. Such employees would have six years from the date of the breach of contract in which to commence legal proceedings. As an employer, this can be an expensive liability to have outstanding for such a period of time.

Even employers who have the contractual right to vary their employees working hours, putting them on ‘short-time’ when work is unavailable, must act cautiously to avoid the pitfalls of the statutory scheme in which employees on short-time working may become eligible to claim a redundancy payment.

To minimise such risks, it is recommended that employers seek legal advice and consider a ‘cards on the table’ approach before taking any action in relation to employee working hours or variation of contractual terms.

Not only would this allow employers to consider all the options available to them, and the implications of these decisions, but the overall cost to the business of obtaining professional advice is likely to be much less than that incurred dealing with protracted legal proceedings and potential damages.

The ‘cards on the table approach’ will allow a full and frank exchange of ideas and give employees a clear indication as to why the employer wishes to alter working hours and how long they anticipate this step will be necessary for. This will maintain the working relationship and minimise the risk of any animosity arising, as the employees will see that the decision is being considered as a necessity rather than simply a cost saving exercise. In addition, employees may also be able to offer additional cost-saving suggestions that employers may not have considered and provide a positive input into maintaining the longevity of the company.

 

 

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