Laying off employees and short time working are temporary measures sometimes used by employers when they suffer a temporary downturn in work. The practice is more common in some industries than others. In summary, laying off means that the employer provides employees with no work (and no pay) and short-time working means providing less work (and less pay). The employees are not dismissed and they remain employees despite the reduced work and pay.
An employer can only lay off an employee or put them on short time working, if they have a contractual right to do so. The contract should also clearly state that the employee will not receive their normal salary during this period.
The law recognises that there are certain circumstances where employees might be entitled to statutory redundancy payments as a result of lay off or short time working, but there is a formal process that has to be followed before they can receive such a payment.
The Employment Appeal Tribunal (EAT) recently considered a case where the employer exercised its contractual right to lay off staff for an indefinite period without pay. Mr Craig, an employee at Bob Lindfield & Sons resigned after over four weeks lay off without pay. Mr Craig was not entitled to claim redundancy, under the required formal process, and instead claimed that he had been constructively dismissed as the lay off period could not be considered reasonable.
The main issue for the EAT to decide was whether a term could be implied into the contract that the lay off should not be for any longer than was reasonable. The EAT held that there was no such implied term and Mr Craig’s claim for constructive dismissal failed.
The EAT found that the employer had a contractual right to enforce the lay off and they had experienced a genuine downturn in work. They also had an expectation that Mr Craig would be able to restart work within four weeks. Mr Craig was accordingly unable to claim constructive dismissal.
However, the EAT did also comment that where an employer keeps an employee on lay off without a reasonable prospect of future work, or otherwise acts in a manner likely or calculated to cause a breakdown in the relationship of trust and confidence, a constructive dismissal case could still arise.
If an employer requires the option to lay off employees, they need to ensure that suitable clauses are included in their contract of employment. They also need to exercise that contractual right reasonably and be aware of the process an employee may follow to claim a redundancy payment.