The fuel crisis and short-time working/lay-offs

As fuel prices have risen and fuel supply shortages continue to affect the country, employers may wish to consider the legal situation if employees can't get to work, or if employers can't provide work, e.g. due to supply issues, or lack of key staff. This is a broad overview and not legal advice, and advice should be sought on specific situations from the Chattertons employment team.

The starting point is that employees are generally responsible for getting themselves into work in contracted hours, and employers have a duty to provide work. Consideration should also be given to employees who need emergency unpaid time off due to disruption to care for dependants, and those who have disabilities. The correct approach to any particular situation will depend on a number of factors, the starting point is the contractual duties of the parties.

For employees working regular hours, where they are required to attend work to be paid, (which isn’t the case with many salaried employees), if the employer is unable to provide work, then they would be required to pay full pay for contractual hours unless there is a contractual right to impose a lay-off from work or short-time, often termed 'LOST'. A LOST clause has to be in a contract (ideally in writing and very unusually if there's no written contract, accepted by 'custom and practice') to be enforceable. A LOST clause allows the employer to either reduce working hours (and pay) e.g. by shortening the working day, or to impose a 'lay-off' whereby employees can be told not to come into work on any particular day and they will not be entitled to pay for that day. However, by law employers laying employees off then have to pay the legal minimum pay called 'Guarantee Pay'; employers must provide a 'Guarantee Payment' of a maximum of £39 (£41 from 6^th April 2026) to employees who are 'laid off', i.e. temporarily 'sent home' without pay for a period of up to 5 working days in any rolling 13-week period. If an employee earns less than £39 a day, then they get their normal pay anyway when laid off. After 5 working days laid off, there is no right to any pay for laid-off employees for a rolling 13-week period. Guarantee payments are taxable income.

Employees who are laid off or face reduced earnings on short-time may be able to seek benefits from the DWP in these circumstances. If a lay-off (or a period of short-time working on less than 50% of normal pay) goes on for 4 weeks in a row or 6 weeks in any 13-week period, employees can resign and claim redundancy pay (if over 2 years service), by giving a formal notice to their employee that they intend to claim redundancy pay. If the employer cannot confirm that normal working hours and pay will be provided in a specified period, then employees can resign and claim redundancy pay and leave. This area of law requires complex formalities of serving notices and counter-notices and advice should be sought if it arises.

If an employer chooses to introduce short-time working and employees get at least half their normal week's pay, then this situation can continue as long as the disruption lasts. If employees on short-time get less than half their normal pay, then they are in a situation like employees who are laid off when it comes to claiming redundancy pay.

Reducing pay with short-time or lay-offs can also cause difficulties with pension contributions and employers should check with pension providers and trustees in any such situation for the correct approach to maintaining contributions.

No LOST clause

Employers who do not have a contractual right to lay off or impose short-time working risk claims for constructive unfair dismissal (from employees with 2 years service) as not paying employees would be a fundamental breach of contract. Alternatively employees could claim for unlawful deduction from wages and seek full pay for the period of short-time working or lay-off. It might be possible to negotiate a temporary variation to contract to agree to a LOST clause, however, this is unlikely to be a quick fix. However, if the alternative is redundancies, employees might agree to a variation with a view to long-term job security. Note that from January 2027 the restrictions on 'fire and re-hire' will make it difficult for employers to negotiate changes to hours of work and pay.

Employers should only use LOST clauses when there is a proper business justification for doing so, and mis-using the clauses could give rise to constructive unfair dismissal claims or claims for underpayment of pay 'properly due' under the contract. Also, they should have a rational and documented basis for selecting which employees to put on short-time or lay-off as there is a risk of constructive unfair dismissal or discrimination claims if the clause is used in a haphazard manner, or if people are singled out for LOST.

If employees can't get into work but employers don't need to use a LOST clause, because they can provide work, they should consider offering the opportunity to take annual leave as an alternative to unpaid leave, and an inability to travel without any fault on the employee's part wouldn't be a conduct issue. Options like remote working should also be considered where practicable.

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