Craig v Bob Lindfield & Son Ltd

Where an employment contract gives the employer an indefinite power to lay off or impose short-time working, the mere passage of time does not ordinarily create a repudiatory breach. The statutory scheme in Chapter III of Part XI of the Employment Rights Act 1996 provides the principal balance between the parties’ interests during a genuine downturn in work.

The employee’s remedy is generally to use the statutory redundancy-payment procedure. An overall common-law test that the period of lay-off must be reasonable should not be implied. A constructive-dismissal claim may nevertheless arise where the lay-off is not genuine or the employer breaches other contractual obligations, including the obligation of trust and confidence.

The claimant was employed under a contract incorporating a handbook which gave the respondent a contractual right to lay off employees or require short-time working when work diminished. Following a downturn, the claimant was laid off without pay for approximately four and a half weeks, subject to statutory guarantee payments. He resigned and claimed constructive unfair dismissal.

The Employment Tribunal held that the contractual power was not subject to an implied requirement that the period of lay-off be reasonable. In the alternative, it held that the period was not unreasonable on the facts. The appeal concerned the conflict between A Dakri & Co Ltd v Tiffen and Kenneth MacRae & Co Ltd v Dawson, and the interaction between any common-law term and the statutory redundancy scheme.

1. Appeal dismissed. The claimant’s resignation did not constitute constructive dismissal because the respondent had exercised a genuine contractual power to lay off employees during a real downturn in work.
2. The EAT followed Kenneth MacRae & Co Ltd v Dawson. Where the contract permits indefinite lay-off, the employee is not ordinarily in breach merely because time has passed. The statutory redundancy-payment procedure provides the appropriate remedy where the employee considers that the lay-off has continued too long.
3. The statutory scheme, contained in Chapter III of Part XI of the Employment Rights Act 1996, postpones entitlement to a redundancy payment for an initial period and then increasingly places the choice in the employee’s hands. It applies whatever contractual period is permitted. Implying a general common-law reasonableness test would create uncertainty and potentially circumvent the statutory scheme.
4. The EAT held that Tiffen, insofar as it supported an overall test of reasonableness, was in error and was not to be followed. The Tribunal therefore did not need to decide whether the period was objectively reasonable.
5. Alternatively, if such a term existed, the statutory timetable would provide a standard from which departure would require compelling, well-evidenced reasons. No such reasons existed. Employer contact with the claimant and the likelihood of work returning could be relevant, but previous periods of reduced work and the claimant’s intention to take another job were not material considerations.
6. The decision did not exclude constructive-dismissal claims arising from lay-off. A claim could succeed where the employer manipulated the power, used lay-off to avoid paying wages or redundancy, or otherwise acted without reasonable and probable cause in a manner likely to destroy or seriously damage trust and confidence. That issue did not arise on these facts.

• Employment Tribunal: Employment Judge Harris dismissed the constructive unfair-dismissal claim, holding that no reasonable-duration term applied and, alternatively, that the lay-off period was not unreasonable.
• Employment Appeal Tribunal: The appeal was dismissed. The Tribunal’s conclusion was upheld, for reasons which differed in part from those given below.