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Rising energy costs and potential blackouts – impact on employers

 960 640 Guest Post
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By Jayne Flint, Associate in the Employment Team at Law Firm Womble Bond Dickinson

Increased energy and supply costs and the potential for blackouts this winter are forcing many organisations to consider reduced opening or manufacturing times. This article looks at the options available to employers and how to consult effectively with staff about changes to terms and conditions of employment.

Background

The National Grid has warned that from January, a series of staggered regional blackouts might be imposed from 4pm to 7pm to manage UK demand for energy.

Most businesses will be affected save for a limited number of “protected sites”, which includes hospitals, care homes, food manufacturers and other organisations that are part of critical national infrastructure.  Organisations that generate their own power will also be able to continue running during any blackouts.

Given this, it is vital to ensure that your business has a plan in place to manage the consequences of blackouts on your operations.

Options

The impact of blackouts will vary according to the size of the organisation, the nature of the work it does and the hours of work or shift patterns it operates.  Employers that already operate flexibly and have embraced remote and hybrid working will, arguably, be much better placed to cope with any  blackouts and less likely to see a significant drop in productivity levels.

This does not mean that such organisations should be complacent. It would be prudent to implement a communication plan and discuss with employees what this means in terms of their agreed working hours, whether those hours can be met through the blackouts (by, for example, varying the times of the day or week that employees work) and, if not, whether the time can be made up later or taken as holiday etc.

For many employers, the reality of managing blackouts and the negative impact this will have on productivity will be much more serious.

Organisations in the manufacturing, hospitality and retail sectors often engage staff on a fixed number of contractual hours each week.  If a decision is made to close or reduce the business during blackouts, this will in all likelihood reduce the number of staff required that week.  This may lead to discussions about a temporary reduction in hours of work, which will be a real challenge for employees who are also feeling the impact of the squeeze on their finances.

Employers need to ensure they navigate these conversations very carefully, as this will give rise to a number of legal risks. Considerations for employers include:

  • whether a temporary reduction in work will trigger the need for collective consultation under section 188 of the Trade Union and Labour Relations Consolidation Act 1992 (TULRCA). Failure to get this right can lead to the automatic payment of a protective award at the employment tribunal of up to 90 days’ pay per employee.
  • consulting with individuals effectively to try and reach agreement on the proposal for a temporary reduction in hours of work. This may well include consideration of alternative suggestions put forward by employees.  “Outside the box” thinking can be a useful mindset for employers to adapt in such scenarios.
  • whether this will technically amount to a “lay off” situation.  This arises where staff are being offered no work or pay (or shorter hours of work) for a temporary period in order to deal with a  downturn in work.  An employee’s contractual and statutory rights (such as, for example the right to guaranteed pay,) will depend on whether or not the employer has the contractual right to lay them off or put them on short-time working, and where a reduction in work legally amounts to a layoff or short term working, this can give rise to claims for constructive unfair dismissal and/or redundancy payments. Getting this wrong can therefore be very costly to the business.
  • ensuring that any decision taken by the business does not lead to claims of discrimination by anyone in the workforce with a protected characteristic on the grounds of, for example, sex, disability, race or nationality, or age.
  • whether a continuation of blackouts will lead to the risk of redundancies. If so, appropriate timeframes will need to be put in place to submit the HR1 form and manage the redundancy process in line with collective and individual consultation measures. The duty to collectively consult and submit the HR1 will be triggered once an organisation “proposes” to make 20 or more employees redundant at one establishment within a 90 day period. Failure to submit the HR1 form on time is an offence under TULRCA, which can lead to the imposition of an unlimited fine. This, along with the employment tribunal’s power to make an award of up to 90 days’ pay per employee for failure to collectively consult, is certainly a cause for focus,

It is also important to consider the wider implications on employee and industrial relations. Unions may object to the measures in an attempt to leverage better overall packages for their members, and businesses in this scenario need to be prepared for some tough conversations.

Preparing a well thought out plan and communicating openly with staff as early as possible will be key to both ensuring the legal risks are well managed and endeavouring to get staff on board with the need for the measures in advance of them being implemented.

Womble Bond Dickinson has a strong national team of employment lawyers and can support your business to manage the legal risks. If you would like a further discussion on a confidential basis about how we can help you, please do not hesitate to get in touch with your usual WBD contact or the author of this article.

Net Zero, carbon capture and hydrogen: Regulatory developments 

 960 640 Stuart O'Brien
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By Matt Lewy (pictured), Energy Partner at law firm Womble Bond Dickinson

The UK government is pressing ahead with the development of the regulatory regime for carbon capture, utilisation and storage (CCUS), following the latest suite of updated business models published in May 2021.

Ultimately the CCUS regime will look like many regulated utilities, with a fixed (or regulated asset base) return paid to operators and investors. That said, there is risk inherent in developing the transport and storage components of a technology largely unproven at significant scale. This is coupled with a need to ensure enough power plants and industrial emitters connect to those systems at an early stage, in order to make them financially viable.

The business model updates look at options for mitigating those risks, with the government ultimately providing backstop support. At this stage, it has not been confirmed who will be the regulator for the industry, and whether this role will be split between the onshore and offshore elements.

The government is running a procurement process, with nascent CCUS clusters in UK industrial heartlands bidding to become one of two priority, or track-1, clusters. These will work with the government in implementing the regulatory regime and developing the returns model both for the development and operational phases of each project. The intention is to apply lessons learnt from the priority clusters, which on current projections will be operational by the mid-2020s, to smooth the path for future investment.

The announcement of the priority clusters is pencilled in for 9 August 2021. There are probably five or six viable proposals under serious consideration. These include St Fergus in Aberdeenshire and Teesside. Whichever of the clusters are selected there will be a certain amount of levelling-up achieved, as there is a requirement to include a significant component of local supply chain content, with associated employment opportunities, within the cluster bidding process. In connection with this, the government has launched a supply chain mapping exercise, the intention being to ensure the UK becomes a market leader in the industry.

It is telling that the CCUS regime is significantly more advanced than that for hydrogen. The priority appears to be the decarbonisation of heavy industry, and learning to apply CCUS to natural gas. Gas power with CCUS will be used to provide electricity whilst the UK scales up renewable electricity generation and addresses its intermittency. Gas with CCUS will also be used in the production of blue hydrogen.

A further update on the use of hydrogen and its regulatory regime is expected from the government shortly. Whether this extends to more long term uses of hydrogen, i.e. outside the confines of localised clusters, such as in domestic heating and mass transport systems, remains to be seen.