The Court of Appeal’s recent decision about the right to guarantee payments could have implications for all employers wishing to impose a temporary reduction in their workers’ hours.
Until this case brought this issue to prominence, guarantee payments were widely thought to belong to the vanishing world of traditional manufacturing, where management reserved the right to lay off workers without their consent if their was a drop in orders. However the Court of Appeal has now made it clear that the right can also arise where workers have agreed to amendments to their contracts to incorporate a shorter working week than normal for a temporary period.
The claimants were employed by AGA Rangemaster at their plant in Leamington Spa. They were hourly paid with a contractual working week of 39 hours, Monday to Friday. In response to poor trading conditions, an agreement was reached with the recognised trade union, the GMB, for a reduction in the working week to 34 hours, Monday to Thursday. Initially for six months, the agreement was extended by a further six months. After a year all the workers were able to revert to a full working week.
The employers argued that they did not have to pay guarantee payments for the missed working Fridays, because the agreement for the reduced working hours became the “new normal”. The Court of Appeal disagreed. It said that it was irrelevant whether the reduction in working hours was contractually agreed or not. The right to a guarantee payment was triggered when work was not provided on a day on which the employee “would normally be required to work”. The agreement was for a temporary period, and did not operate to displace the normal working days.
It would not be a big stretch to apply a similar analysis to workers employed by universities and colleges under zero-hours contracts and other similarly flexible working arrangements, including hourly paid and visiting lecturers. If, despite the wording of the contract, a regular pattern of normal working days has grown up, it is possible that a temporary reduction in these hours could trigger a claim for guarantee payments. Given the wide use of these arrangements in the education sector, the possibility of triggering these claims needs to be factored in when institutions are examining ways to reduce their staffing costs.
Guarantee payments are based on a hourly rate calculated by dividing a week’s pay by the worker’s normal working hours, but subject to an overall maximum which is currently £24.20 a day. The relatively modest levels of these payments – of which no more than five can be claimed in any three month period – may account for the paucity of case law about them. Until this recent case emerged, there have been no cases about them in a generation