Employment Law Update (July 2009)
British Airways asks staff to work for free
Employers who have been following the news will have watched in
disbelief as British Airways (BA) asked its employees to work for
up to a month without pay – and according to reports, 800 of them
have agreed to do so. The natural questions in the minds of
employers will be "Can BA do this?" and, perhaps more importantly,
"Can I ask my own staff to do this?"
Changes to employees' terms and conditions to save businesses
money are a hot topic as the economy proceeds through the current
recession. However, proceeding without taking detailed legal advice
is immensely risky as, if you get it wrong, employees can make
claims in employment tribunals for unpaid or underpaid wages,
redundancy payments or even constructive dismissal.
So, can I get my staff to work for free?
In a word, no. For starters, all employees must be paid at least
the National Minimum Wage for all hours worked.
If you attempt to spread the pain of the "free weeks" by
reducing pay over a longer period, that would involve a change to
employees' terms and conditions of employment, and to do this, you
must first get their agreement to the change. Perhaps
unsurprisingly, employees might not readily agree to such a
change.
Is there anything else I can do to reduce staff
overheads?
Traditionally, employers have reduced staff costs by making
redundancies. The advantages of this approach are that it
permanently reduces headcount and business costs and decreases
uncertainty for the remaining employees once the exercise has been
completed. The downside is that it will cost money in the
short term (in redundancy payments) and might leave the business
short of skilled workers ready for when business picks up, although
a properly thought-through redundancy selection process should
reduce the risk of this happening.
A feature of the current recession has been the apparent
reluctance of employers to make large-scale redundancies, but
instead for agreements to be reached with staff on temporary
lay-off, extended holidays and pay cuts. Perhaps this has
been prompted by the extremely sudden nature of the economic
downturn, with employers with previously modern and profitable
businesses unwilling to make such a final move as making
redundancies, in the hope that things will shortly be back to
"business as usual".
Explain, consult, agree…
The one thing most of the current devices to avoid redundancies
have in common is that they all in effect amount to temporary or
permanent pay cuts. This means firstly that employers in
low-paid sectors will have to seriously consider whether they are
still meeting the requirements of the National Minimum Wage
Regulations on pay and the Working Time Regulations on paid
holidays before considering any such scheme.
In all cases, there must be a binding agreement between the
employer and the employee to take the action proposed. A failure to
agree and to put this in writing is likely to mean that an employee
will simply claim the difference between his or her previous rate
of pay and the new rate through proceedings in an employment
tribunal. Furthermore, any attempt by the employer to take action
against the employee for taking such action, for example by
dismissing the employee or making him or her redundant, is likely
to be seen as unlawful action against an employee for "asserting a
statutory right".
The first thing to look at is what flexibilities are available
in the existing contracts of employment, including any that have
been applied by "custom and practice". To make any changes, the
starting point is to have a good business reason and to be
absolutely clear and open about this to the employees
concerned.
The next stage is to consult with all staff about the proposals.
In a workplace that recognises a trade union, such consultation
might take place with the union or unions; in other workplaces it
would be with the staff themselves.
The final stage is to put the agreement that has been reached
into writing, so that both employer and employees know its exact
terms, including whether it is to be a temporary or permanent
change.
Take advice
Perhaps the most important advice for employers is to take
advice before taking any action at all. Many of the news reports
concern large employers, where agreements with recognised trade
unions have been reached, and often involve relatively highly-paid
employees who can more easily afford to take a small pay cut. In a
smaller organisation without a recognised trade union, there are
less likely to be established procedures for negotiating and
agreeing changes to terms and conditions.