Laying employees off: how long is too long?

Employers sometimes find themselves having to negotiate through tougher trading times and difficult economic periods and as such, redundancies and business restructures can become necessary courses of action for businesses to take. Redundancies and restructures naturally have a degree of finality about them and so in some circumstances employees prefer options that allow them to ‘ride the storm’ and to come out of difficult trading periods relatively unscathed.
The best alternative options in this regard are often considered to be lay off and short time working. The latter involves reducing the overall number of hours which employees undertaken for a certain period of time whereas the former involves lawfully stopping the employee from undertaking any work at all during a certain period. Although both short time working and lay off have their consequences, lay off especially can help businesses to survive tricky trading periods without having to reduce overall headcount or, become liable for redundancy payments or, indeed the costs of restructure at an already difficult time.
In order to lay an employee off an employer either needs an express contractual right to do so or, the employee’s consent to do so. An employee can be laid off for either 6 consecutive weeks or 6 non-consecutive weeks in a 13 week period before they become eligible to make an application to their employer for redundancy. An employer must not act in a discriminatory manner when selecting employees to be laid off but as the recent case of Craig v Bob Lindfield and Sons, demonstrates there is no requirement for the length of the lay off period to be considered ‘reasonable’.
In this case Mr Craig’s employment contract allowed for lay off and short-term working for an indefinite period, without pay. After four weeks lay off without pay, he resigned and claimed that he had been constructively dismissed because the lay-off had gone on for longer than a reasonable period. The employment tribunal held that there was no term to be implied as to reasonableness so far as the length of lay off was concerned, but that if there had been, the period was not unreasonable in all the circumstances of the case. As there was no repudiatory breach of contract, there was no constructive dismissal.
Mr Craig appealed his case to the Employment Appeals Tribunal (EAT) which dismissed the appeal, ruling that there was no implied term as contended for. The EAT considered that because there was an express contractual provision allowing for lay off in line with the statutory requirements, there could be no breach of contract, in any circumstances, if the lay-off had not exceeded the 6 week period necessary to entitle the employee to apply for redundancy.
Although this is good news for employers, the EAT did not however rule out a constructive dismissal claim based on the employer’s breach of the duty of trust and confidence (for example if the employer’s desire to maximize profits resulted in behaviour calculated to damage or destroy the relationship of trust and confidence) but in the case, because the length of the lay-off was actually necessary and indeed reasonable given the businesses needs at that particular time, this point was not relevant. Employers should always therefore be mindful not to lay employees off indefinitely when there is not genuine requirement to do so.
For more information on lay off, short time working or, alternative options for managing difficult trading conditions please contact our advisory team on 01274 864999.