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23rd February 2016

Lay-off Periods and Reasonableness

Employers can often find themselves having to trade through tough economic periods and as a consequence of this, lay-off and short time working options can be explored.

The general legal position

An employer may lay off employees’ (i.e. stop providing work whilst still remaining employed) during a short-term, temporary downturn in work. However, in order to be able to do this, you must have a contractual right to do so, and the contract should make clear that the employee will not receive their normal salary during the lay-off period. If you lay off an employee without an express or implied right to do so, you will be in fundamental breach of an employee’s contract entitling the employee to resign and claim constructive dismissal.

Laid off employees are entitled to claim a statutory redundancy payment, where they have been laid off for at least four consecutive weeks or a total of six weeks in any 13 week period, and where no more than three weeks are consecutive.

Is a contractual right to temporarily lay off a worker subject to an implied term of reasonableness?

No, recently held the Employment Appeal Tribunal in the case of Craig v. Bob Lindfield & Sons [2015]. 

The Claimant in the case, Mr Craig, was temporarily laid off from work due to a downturn in work that led to his employer operating the contractual lay-off clause. His contract of employment contained an express right which allowed for lay off and short-term working for an indefinite period and without pay. After 4 weeks’ lay off without pay, Mr Craig subsequently resigned and claimed that he had been constructively dismissed because the lay off had gone on for too long and as such, was unreasonable.

However, the Employment Tribunal held that there was no term to be implied as to the reasonableness, so far as the length of lay-off was concerned, but if there had, the period of lay-off was not unreasonable in the circumstances of the case. As such, there was no repudiatory breach of contract and the Claimant’s claim for unfair dismissal failed.

Mr. Craig appealed and the EAT dismissed the appeal, ruling that there was no implied term.

This case is useful in demonstrating that where an employer has to temporarily lay-off its employees’, in which no work and no pay is subsequently provided, this will not constitute a breach of contract insofar as the test of reasonableness is concerned.

Carley Kerrs-Walton, Employment Solicitor, Napthens LLP – QCS Expert Employment Law Contributor

Topics: Human Resources

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