Coronavirus and its potential impact on employee rights
Tatevik Grigorian, February 24, 2020
There could be backlash from employees if businesses have to cut staff or reduce hours as a response to drops in business due to the coronavirus
The increasing number of reported coronavirus cases is extremely worrying. The greatest impact to date is in Asia. Drastic steps have been taken by the relevant governments to contain the outbreak and businesses have been forced to follow suit.
Cathay Pacific, Hong Kong's leading airline, is temporarily cutting 90% of flights to mainland China and reducing flights worldwide by 30%.
This has forced it to implement hiring freezes, to seek supplier price reductions, postpone major projects and stop all non-critical spending.
It has also asked its 27,000 employees worldwide to take three weeks' unpaid leave between 1 March and 30 June 2020 to help reduce the devastating impact on its finances caused by the significant drop in demand for flights.
So what employment law challenges could Cathay or businesses in similar positions face if employees are unwilling to co-operate?
Both UK and Hong Kong law permits employers to implement redundancies where there is a reduced requirement for employees to carry out work of a particular kind.
In both jurisdictions staff are entitled to receive a statutory redundancy payment if they have more than two years' complete service.
This is capped at HK$390,000 (£38,671) in Hong Kong and £15,750 in the UK. These payments could be even larger if there is an enhanced company redundancy scheme.
Employees will also be entitled to receive notice or a payment in lieu of notice.
Redundancy would be a drastic option because of the large short-term costs, the need to follow lengthy and time-consuming consultation processes (in the UK), and the impact on the business' ability to meet demand once service returned to normal.
As an alternative, the employer could seek to implement a temporary layoff, which in effect permits it to keep employees on the books but on reduced terms.
To implement this process in both Hong Kong and the UK the employer must have an express right in the employment contract. Without this it is left relying upon employee consent.
In Hong Kong employees who have been laid off are entitled to a severance payment if the period of layoff exceeds 50% of their normal working days in any four consecutive weeks or a third of the total number of normal working days in any 26 consecutive weeks. Similar rules also apply in the UK. Layoff is helpful but only as a short-term solution.
If employees are reluctant to take unpaid leave the business may instead opt to request that staff utilise their paid annual leave. Under UK law employers are permitted to direct employees to take holiday at designated times provided they give sufficient notice.
This could therefore be an attractive option, especially as statutory holiday allowance is fairly generous. In Hong Kong the statutory holiday entitlement is between seven and 14 days depending on length of service (in addition to public holidays), therefore this may be of less benefit.
Finally, to encourage employees to take unpaid leave now, Cathay may consider offering back payment once flights resume and cash flow is restored.
What options do the employees have?
The request to take three weeks' unpaid leave is voluntary and the employees can refuse to do so. Hypothetically, if the company were to impose unpaid leave on its employees, it could face claims for illegal deduction of wages, which is a criminal offence under Hong Kong law and a civil matter under UK law. It is therefore not surprising that the business' 'special unpaid leave scheme' is presented on a voluntary basis only.
With the threat of the coronavirus affecting the UK on a larger scale it would be prudent to consider your contingency plans now.
Tatevik Grigorian is a lawyer at iGlobal Law – an international employment law subsidiary of Wedlake Bell