Insight: Do you have to pay staff if you can’t operate your business due to energy challenges?

Last month, the government announced that it was going to scale back business energy subsidies for the next financial year by about 85%. Whilst that will impact nearly all employers, sectors with high energy use are particularly vulnerable. A recent survey found that almost two-thirds of manufacturers in Britain feared blackouts this winter because of the cost of energy. Joanne Moseley from Irwin Mitchell looks at the key issues you need to consider if disruption to your business did occur.

It’s not just a question of cost. The government recently reported that they may need to enforce temporary energy blackouts due to a shortage in the amount of energy available to the UK. Although that risk seems to be reducing, employers need to be prepared so that they can respond quickly.

Planning ahead

The lights won’t simply go off. Under the electricity supply emergency code, households and businesses will be given 24 hours’ notice of a planned outage, and the plan could be published up to a week ahead on a rolling basis. That should give you enough notice to put in place contingency plans.

Asking staff to work from a different location

If you operate across multiple sites and the power outage only impacts one location, you may be able to ask staff to work from a different location on a temporary basis. You could also ask those members of staff who can work from home to do so.

Generally, you can only do this if your employees’ have a mobility clause in their contracts of employment and you act reasonably when enforcing it. For example, even if you have a clause which says that you can require your staff to work anywhere within the south-west, it’s likely to be unreasonable to ask those who are based in south Cornwall to travel to North Devon.

If you can’t rely on a mobility clause, you could ask your staff to agree to work elsewhere for a short time. You might have to facilitate this by providing transport, or reimbursing them for additional travel costs.

Sending staff home

If you cannot operate your business at all – either because staff can’t operate the tools they need to continue to work, or because continuing to work would compromise their health and safety – you will need to send them home unless the outage is only expected to last for a short time.

Providing a member of staff is able and willing to work (which they will demonstrate by turning up) you must continue to pay them unless you have a contractual right to lay them off or to reduce their hours.

Lay off

If you have a contractual lay off clause you want to exercise, you’ll need to write to all affected staff to explain why you need to lay them off, how long you anticipate it lasting (there’s no maximum period and the concept of ‘reasonableness’ don’t apply here), how much they will be paid and when they can apply for a statutory redundancy payment. The maximum pay is £31 a day for five days in any three-month period (so a maximum of £150).

If you’ve laid off staff before without an express contractual clause, you might be able to rely on an implied right to do so again. We recommend you take advice before attempting this.

Short time working

This is another option and it means providing employees with less work and therefore less pay. You’ll need an express term in the contract to rely on this or an implied right to do so.

No contractual lay off clause?

If you don’t have an express or implied right to lay someone off or reduce their hours, if you go ahead anyway without their agreement, you could face a number of employment claims:

• Damages for breach of contract
• Unlawful deduction from wages
• Constructive unfair dismissal and redundancy pay (they’ll need to resign first and have at least two years’ service)

Employees who already work from home

If you’ve got staff who already work from home, you’ll need to discuss with them what will happen if they can’t work because of a power outage at their home. Can they travel to the office on those days? Or is there another space they can work from? If they can’t work, you don’t have to pay them. As an alternative to losing pay, you could agree that they can make up the time within an agreed period of time (which shouldn’t be difficult if the outage is temporary) or allow them to take annual leave.