No implied term of reasonableness in lay off clause

If an employer is faced with a temporary downturn in work, they may consider laying staff off until the work returns. Unless the employer has a contractual right to lay off staff, they will be in fundamental breach of contract and the employee may resign and claim constructive dismissal.

If an employee is laid off for at least four consecutive weeks (or for six weeks in total) there is a procedure that can be engaged by which an eligible employee can claim a statutory redundancy payment. As part of the procedure, an employer can serve counter notice on the employee if they believe that work will become available within four weeks.

Mr Craig was employed by Bob Lindfield and Sons Ltd as a CAD designer. He was told by his employer that he would be laid off from 21 July 2014, a contractual staff handbook contains a provision allowing staff to be laid off. Having been laid off for five weeks, Mr Craig told his employer that he had found new employment and that he would be starting his new job on 1 September 2014. He told his employer that he assumed that he would be entitled to a redundancy payment. Lindfield’s replied that Mr Craig was still needed and that they hoped that work would resume shortly.

Mr Craig brought proceedings in the employment tribunal claiming that the period of lay off had been unreasonably long and that he had been constructively dismissed. An employment tribunal found that there was no implied term that a period of lay off should be reasonable and that even if there was the period in question was not unreasonable. The Employment Appeal Tribunal (EAT) dismissed Mr Craig’s appeal finding that where there is a real prospect of work returning, redundancies are not in the interest of either party. There is no implied term that a period of lay off has to be reasonable.

Comment

In this case the EAT confirm the decision in Kenneth McRae & Co Ltd v Dawson that there is no maximum period for which an employee can be laid off, a contractual right is not normally subject to any test of reasonableness. While laying staff off may be a better alternative to redundancy, where an employee genuinely believes that work may pick up, employers still need to ensure that they have a contractual right to lay off in order to avoid a claim for constructive dismissal.

Craig v Bob Lindfield & Sons Ltd [2015] EAT 0220

15 April 2016

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