Dutton v Jones (trading as Llandow Metals)

For redundancy payments arising from short-time working, the calculation date used to determine entitlement to a redundancy payment is governed by Employment Rights Act 1996, section 226(5) and (6), not section 226(4). Section 226(4) serves the separate purpose of determining whether the employee was on short-time working.

Where an employee works short-time on the calculation date, the employee’s week’s pay is based on the original contract and the normal working hours under that contract. Short-time working does not, without more, amount to acceptance of a permanent contractual variation reducing normal working hours.

The appeal arose from a redundancy payment claim by an employee who had worked for the respondent for many years and had been placed on short-time working. His five-day working week had been reduced to one day, reducing his weekly pay from £250 to £48.

The Employment Tribunal calculated the redundancy payment by using section 226(4) and treating the reduced pay as the relevant week’s pay. It awarded £1,440. The appeal concerned the correct calculation date and whether short-time working altered the employee’s normal working hours for calculating a week’s pay.

1. Appeal allowed in substance. The Employment Judge had applied the wrong statutory provisions when calculating the redundancy payment.
2. Section 226(4) applies when determining whether an employee is on short-time working for the purposes of section 147(2). It does not provide the calculation date for calculating the amount of a redundancy payment under section 162.
3. For the redundancy payment calculation, section 226(5) and (6) apply. The calculation date is determined by reference to the notional statutory notice which would have been given by the employer, ending on the relevant date. In a short-time working case, the relevant date is identified under section 153(a) by reference to the last of the qualifying consecutive weeks before the employee’s notice.
4. Under section 221(2), where remuneration does not vary with the amount of work done, a week’s pay is the amount payable under the contract in force on the calculation date if the employee works normal working hours. Short-time working does not, without more, create a permanent contractual variation reducing those normal hours. The original contract therefore remains the relevant contract.
5. The matter was remitted to the Employment Judge to calculate the payment in accordance with those principles. The respondent was to have an opportunity to make written representations.

• Employment Appeal Tribunal: allowed the appeal in substance against the Employment Tribunal’s calculation and remitted the matter for recalculation.
• Employment Tribunal: awarded a redundancy payment of £1,440, using a calculation date derived from section 226(4) and a week’s pay of £48.