Payne Hicks Beach

Payne Hicks Beach

11 December 2012

When can employees claim for guarantee payment?

Employment partner, Sarah Rushton, explores the issues surrounding when an employee can claim for guarantee payment.


26/11/2012

Employment analysis: Employees that enter into an agreement to vary their working hours may not be entitled to guarantee payments. Sarah Rushton, partner at Payne Hicks Beach, says the decision in Abercrombie is good news for employers, but those advising employees need to be aware of the implications of this case.

 

Original news

Abercrombie & others v Aga Rangemaster Ltd [2012] All ER (D) 334 (Oct)

The Employment Appeal Tribunal dismissed the employees' appeal against, inter alia, the decision of the employment tribunal to dismiss their claims for guarantee payments as the Employment Rights Act 1996, s 28(1) did not preclude an agreed temporary variation constituting a change to an employee's normal working hours so as to prevent the award of a guarantee payment merely because the variation was temporary.

What was the key issue in this case?

'Laying off' employees means the employer provides employees with no work and no pay for a period while retaining them as employees. 'Short-time' working means providing employees with less work (and reduced pay) for a period while retaining them as employees. This is a way for an employer to save money in an economic downturn. It is an alternative to making redundancies--in recent times the use of both methods has therefore become more common (short-time working has even been used by some law firms).

There will be a breach of contract where the employer lays off employees or puts them on short-time working without the contractual right to do so.

In Abercrombie, the employer entered into an agreement with the GMB union in order to avoid redundancies. Under the agreement, GMB put a proposal to its members for a temporary reduction in working hours and an equivalent reduction in pay. The proposal was accepted.

As trading conditions had not improved, the reduced hours working was then extended further, again by agreement. After the employer refused to confirm guarantee payments would be paid during the period of reduced hours, a formal grievance was lodged by the GMB. The employer did not uphold the grievance. A claim for unlawful deduction of wages and non-payment of guarantee payments was then made to the Employment Tribunal.

What were the findings of the Employment Tribunal?

The Employment Rights Act 1996, s 28(1) (ERA 1996) provides, when an employer fails to provide work, the employee is entitled to a statutory guarantee payment in certain circumstances.
The Employment Tribunal found there was a clear temporary variation of the employees' contracts of em-ployment. As a consequence of this variation the employees were not 'normally required to work' on Fridays and therefore were not entitled to a guarantee payment for the period they were not working. The employees appealed to the Employment Appeal Tribunal (EAT).

What were the findings of the EAT?

The EAT dismissed the appeal. The fact an agreed variation of contract is temporary does not prevent there being a change to employees 'normal working hours' for the purpose of considering an entitlement to guarantee payments under, ERA 1996, s 28(1).

The employees sought to rely on ERA 1996, ss 30(5) and 31(6) to show guarantee payments were payable where there had been a variation of contract, but found no help there. The EAT took the view those clauses were to do with the calculation of the guarantee payments, not the initial entitlement to them. The EAT therefore applied a very restrictive interpretation of the entitlement to guarantee payments.

What are the implications for lawyers?

The purpose of a guarantee payment is to assist employees who are put on short-time working hours, leaving them with reduced pay, which was precisely the situation here. It now appears that where there is an agreement to vary working patterns (as opposed to an employer imposing a contractual right to lay off em-ployees without pay), then that varied pattern will become the normal working pattern and the employees will be deprived of any guarantee payment.

Whilst the case is good news for employers, those who advise employees need to be aware of its implications and advise their clients that if they agree to a variation of their contract, even on a temporary basis, chances are they will not be entitled to a guarantee payment. It would not be surprising if the case was further appealed.

 

Interviewed by Duncan Wood.

The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.


This article was first published on Lexis PSL on 26 November 2012. A free trial of Lexis Library is available here:
http://www.lexisnexis.com/uk/lexispsl/

 


 

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DX 40 London/Chancery Lane
Tel: 020 7465 4300 Fax: 020 7465 4400 www.phb.co.uk 

This publication is not intended to provide a comprehensive statement of the law. It is intended to highlight some issues current at the date of its preparation.

Specific advice should always be taken.

The firm is authorised and regulated by the Solicitors Regulation Authority: SRA Number 00059098

© 2012 Payne Hicks Beach


 

10 New Square, Lincoln's Inn, London WC2A 3QG

DX 40 London/Chancery Lane
Tel: 020 7465 4300 Fax: 020 7465 4400 www.phb.co.uk

This publication is not intended to provide a comprehensive statement of the law and does not constitute legal advice and should not be considered as such. It is intended to highlight some issues current at the date of its preparation. Specific advice should always be taken in order to take account of individual circumstances and no person reading this article is regarded as a client of this firm in respect of any of its contents.

The firm is authorised and regulated by the Solicitors Regulation Authority: SRA Number 00059098

© 2017 Payne Hicks Beach

 

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