Laying off employees means that the employer does not provide any work to the employee, with no pay for a period of time whilst they remain an employee. Short-time working means providing employees with less work and less pay for a period whilst they remain an employee.
These are temporary solutions to the problem of no work, unlike dismissal. This may be beneficial to an employer as a way of dealing with an unexpected downturn in business as it may save them money but retains the employees for when the work returns.
Lay off and short-time working is frequently used in sectors such as manufacturing and workers working on the factory floor. However due to recent economic downturns, they are being increasingly used more widely for salaried employees in the professional services sector.
Employers need to be mindful that there will be a breach of contract where they lay off employees without a contractual right to do so within the employee’s contract of employment.
In the recent case of Craig v Bob Lindfield & Son Limited, the Court considered whether an express power to lay off is subject to an implied term of reasonableness.
Mr Craig’s contract of employment had lay off and short-term working clauses without pay for an indefinite period. After he had been laid off for four weeks without pay, Mr Craig resigned claiming constructive dismissal on the basis that the lay off period was longer than a period that is reasonable.
The Employment Appeal Tribunal held that there is no implied term of reasonableness in a contractual provision allowing employees to be laid off or put on short-time working for an indefinite period without pay. It was found that there had been a genuine downturn in work that had led to the employer operating the contractual lay-off clause, and the employer had legitimately followed the statutory scheme under which a redundancy payment does not have to be paid if there is a reasonable expectation that further work will become available within four weeks.
If you require any advice on including lay off or short-time working clauses in your contracts of employment or how to apply such clauses in practice, please contact our expert Employment & HR Team on 0845 287 0939 or by email.