How long can an employer lay-off an employee?

A common cause of confusion occurs around the subject of an employee being "laid-off". In general most people use the term to mean "being made redundant". Redundancy is of course a potentially fair reason for termination of employment, and is therefore the reason to end an employee's employment. However, under the Employment Rights Act 1996 the term "lay-off" is a different concept, and covers the situation where an employer has the contractual right to lay off an employee without their normal pay. 

The provision to lay-off an employee has historically been linked to certain industries, or in areas of work where the availability of work has fluctuated. The contractual right to lay -off an employee enables the employer to lay- off the employee, thereby not require that employee to carry out any work, while still remain contractually bound to the employer.

Legislation provides for the payment of a "guarantee payment" to an employee that has been laid -off. But the payment is very limited and is only a modest amount.

A recent case in the Employment Appeals Tribunal concerned the issue of the exercise of a contractual right to lay off an employee.

The case of Craig v Bob Lindfield & Sons concerned Mr Craig's contract of employment, and the provision in it which allowed his employer to lay him off for an indefinite period. The contract allowed the employer to lay him off indefinitely without pay. After having been laid off for 4 weeks laid- off without contractual pay Mr Craig resigned and then commenced a claim that he had been constructively and unfairly dismissed  asserting that the lay off had gone on for longer than was reasonable. The Employment Tribunal that heard the case followed an earlier case which indicated that there was no implied restriction as to how long an employee could be laid off work. On that basis the Employment Tribunal concluded that there had been breach of contract to form the basis of a claim of constructive unfair dismissal. 

In the Employment Appeals Tribunal (EAT) it was concluded that there was no implied term of reasonableness to be considered in respect of the period of a lay-off, and that if the contract provided for a period when no work would be offered and no money paid, then the failure of the employer to pay in those circumstances will not amount to a breach of contract. The EAT also noted that the law already enables an individual to serve a notice on his/her employer after a set period claiming the entitlement to a redundancy payment. In the circumstances the EAT would not imply any contractual term limiting the period of lay off allowed under the written terms of the individual contract of employment. However, the EAT did note that a constructive dismissal claim may still be based on a breach of the implied term of trust and confidence, but that this issue was not relevant in the particular case.

Employers must be wary insofar as the right to lay-off an employee depends on the terms being part of the contract of employment-which should be in writing. Lay-off provisions should be considered in businesses where work may be sporadic or unpredictable. It should also be noted that this case addresses the law on lay-off as set out in the Employment Rights Act, which is not the same as the law on redundancy.

If you need advice on any issue raised in this article do not hesitate to contact us at Hallett Employment Law Services Ltd.