You are an employer at a small company employing staff. There is a downturn in work, but you are hopeful that you will be able to turn things around without making any redundancies. The contracts of employment that you have with your employees expressly reserve a right to temporarily reduce their hours of work or give them no work. In both cases, the contract allows you to reduce the pay for affected employees pro-rata to the reduction in work. You choose to temporarily lay-off an employee. Is the amount of time that the employee can be laid off subject to a requirement of reasonableness?
This was the question before the Employment Appeal Tribunal in the case of Craig -v- Bob Linfield & Son Ltd.
Mr Craig was a computer aided designer. He had been employed by the company for 10 years prior to his resignation in August 2014. In the years 2009, 2012 and 2013, there were reductions in the work that the company had and they chose to introduce short-time working for Mr Craig, and to reduce his pay pro-rata. On each occasion, work picked up and his hours of work were reinstated.
In the summer of 2014, there was a further reduction in work for the company and they chose to exercise their contractual right to lay-off Mr Craig and other members of staff. During the period of lay-off, he was entitled to and did receive a statutory guarantee payment (the current amount of statutory guarantee payments is £26 per day and the maximum number of guarantee payments is 5 days in a 3 month period).
The lay-off lasted for 5 weeks and during this time, the owner of the company kept in touch with the employees to provide them with updates and to reassure them that he did not want to make them redundant.
In some circumstances, the law allows employees to serve a notice claiming a statutory redundancy payment after a period of lay-off. Mr Craig was unhappy about the length of the lay-off and tried to claim a statutory redundancy payment. Unfortunately for him, however, the company was able to show he had not met the criteria for claiming such a payment. In response to this, Mr Craig resigned and brought a claim for constructive dismissal. He asserted that the contractual term allowing a lay-off was subject to a requirement that the length of the lay-off be reasonable. He lost at first instance, and appealed to the Employment Appeal Tribunal.
The appeal came before the President of the Employment Appeal Tribunal, Mr Justice Langstaff. He concluded that in the context of short time and lay-off, parliament had set up a system of guarantee payments and a right to claim redundancy pay. The purpose of this was to balance the rights of employer and employee. Since parliament had created such a scheme, there was no need for the lay-off to be subject to the test of reasonableness. Since the contract allowed for a period of lay-off and the contract had not been breached by the company, the EAT concluded that Mr Craig had not been constructively dismissed.
Prudent employers will ensure that there is a short-time and lay-off clause in the contracts of employment that they give to employees. In good economic times, these clauses will almost never be used, but in a harsher economic climate, they can prove invaluable.
For further information or to discuss your employment contracts, please get in touch by telephone on 01234 270600 or email at firstname.lastname@example.org