In an important decision made earlier this year, the Employment Appeal Tribunal has provided guidance on employees who have been laid off from work.
The decision means that an employee in England or Wales may face a lay-off situation where their employer is experiencing a temporary reduction in work. In such cases the Contract of Employment is suspended for a specified number of weeks.
This situation is not to be confused with a Redundancy, although a redundancy payment may be appropriate if there is no reasonable prospect of further work becoming available, or if certain criteria in the Employment Rights Act 1996 are met.
The case that bought about this guidance is Craig v Bob Lindfield & Son Ltd  ICR 527. Until this case was heard, there were conflicting views on what approach should be taken by the Employment Tribunal. In one particular case an employee successfully argued that there should be an implied term read into the contract of employment, meaning the lay-off needed to be for a reasonable amount of time. Alternatively in a separate decision the Employment Appeal Tribunal found that no such implied term could be read into a contract, and the contractual terms would therefore be interpreted as they were written.
The facts of the Craig case involved an employer laying off an employee for five weeks without pay. According to the contract of employment, the employer was entitled to lay-off an employee for an indefinite period without pay or put them on short-time working. The employee, however, felt the length of time was unreasonable and that the Employment Tribunal should have implied a term of reasonableness into the contract. Because of this belief, the employee resigned and claimed Unfair Constructive Dismissal owing to a breach of his contract.
In the first instance the Employment Tribunal dismissed the employee’s claim, finding they could not imply a term into the contract of employment and the express written term could not be overruled.
The employee (the Claimant) appealed to the Employment Appeal Tribunal on the basis of a previous case (A Dakri & Co Ltd v Tiffen  IRLR 57) which held an implied term could be inserted. The Employment Appeal Tribunal dismissed the Claimant’s appeal and firmly stated no implied term may be inserted into a contract regarding the reasonableness of the length of a lay-off. The Employment Appeal Tribunal further held prior decisions made allowing an implied term were not correct.
The Employment Appeal Tribunal also noted in this case that it considered the lay-off to be a reasonable amount of time in the circumstances. Additionally, it considered the ability of some employees to claim a redundancy payment under the Employment Rights Act 1996 to be enough protection for employees, making further implied terms unnecessary.
It is important, however, that lay-offs must be shown to be for a genuine reason. If there is evidence to suggest the lay-off has been imposed for any other reason, an employee may be entitled to resign for a breach of the implied term of mutual trust and confidence. If your employer exercises its contractual right to impose a lay-off it must be genuine and it must not manipulate lay-off or short-time provisions for its own economic benefit at the expense of employees, otherwise it could amount to a repudiatory breach. This could lead to a claim for constructive dismissal.
An employee may claim a statutory redundancy payment if he is laid off or put on short-time working for a specified number of weeks. The case of Craig also confirmed an employee can still claim a redundancy payment after four weeks of lay-off, whatever the contract provides as to the permissible duration of lay-off or short-time working. For example, if a contract provides for a maximum two-month lay-off period the employee could still service a notice seeking a redundancy payment after four weeks.
If you are seeking employment law advice on your current redundancy, lay-off or short-time working situation, or whether you have a potential claim for unfair constructive dismissal, please contact our Employment Solicitors to find out how we can help you.
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