Do employment contracts cover unforeseen events?

Last month’s English riots served as a reminder of the huge disruption and upheaval such unforeseen incidents can cause to businesses.

The disturbances left many business owners having to make claims to their insurers for damage to stock and premises, with some losing their businesses entirely.

This brought employee rights into the spotlight, in particular the issue of employee pay and redundancy when a business is unable to trade normally, either because of damage caused by the rioting, or early closure on police advice.

An employer, on the face of it, cannot make deductions from an employee’s wages unless there is a written term in the contract of employment that allows for deduction of wages.  Therefore, if the employee is ready and willing to work, the employer should continue to pay the employee, even if the employee is unable to work due to the damage and disruption.

However, this is dependent upon a number of issues including the status of the worker and the terms of employment contracts.

If an employee is paid a salary or a weekly wage, and has guaranteed hours of work, they will be entitled to their wages. However, a casual worker who is paid hourly for the work they do without the hours being guaranteed will not be entitled to their wages.

It is worth noting that employers may be able to exercise the right to temporarily ‘lay off’ staff without pay (or place the employee on short time working) if there is specific provision for this within the employment contract. In this scenario the employee may be entitled to a statutory guarantee payment for a maximum of five days where the employer cannot provide him with work (currently capped at a maximum of £22.20 per day). This can provide significant savings for employers but obvious difficulties for the employees involved.

Alternatively, there may be a redundancy situation that means the employment can be ended by reason of redundancy. There must be a genuine redundancy situation; the most likely is the closure of the business.

If a business has been destroyed or damaged by an unforeseen event then it will probably have to close, either permanently or temporarily, to carry out necessary repairs. A business which closes temporarily can still make people redundant, but the issue of whether temporary closure is a genuine redundancy situation is a question of fact. Case law on this matter suggests that four weeks for refurbishment is not enough to establish a genuine redundancy situation.

If an employer does decide to make people redundant due to business closure then it must first consider any alternative work available within the business, especially if the business operates from a number of sites. The employer must follow a fair procedure and is obliged to ensure the correct redundancy payments are made.

If you would like further advice on this matter, or any other employment law issue, please contact our Employment team on 01772 258321.