The rules on statutory redundancy payments recognise lay-offs and short time working as alternatives to redundancy by providing (in short) that employees are entitled to claim a statutory redundancy payment if they have been laid off or kept on short-time working for at least four  consecutive weeks. The employer can defend the employee's claim for a redundancy payment if it reasonably expects that work will restart within four weeks.

However, an employer can only lay an employee off, or put them on short time working, in the first place if it has a contractual right to do so. If the right is open ended, can the employee argue that the period of lay-off has to be limited to what is reasonable? If so, and a reasonable period of lay-off is exceeded, the employee would be able to resign and claim that they had been unfairly dismissed. This might be more attractive than claiming a statutory redundancy payment under the statutory scheme.

To date, the use of lay-offs has largely been confined to the manufacturing sector, but Craig v Linfield & Son involved a design and technology company which, following a drop-off in work, exercised its contractual right to lay off staff for an indefinite period. The issue was whether the length of the lay-off – just over four weeks – amounted to a breach of contract entitling an employee to resign and claim constructive dismissal.

There were conflicting EAT cases on this in the 1980s. A Dakri & Co Ltd v Tiffen decided that  any contractual lay-off should be limited to a "reasonable period"; Kenneth MacRae & Co Ltd v Dawson three years later disagreed, the EAT pointing out that an employee who thought that they had been laid off for too long could follow the statutory procedure for claiming a redundancy payment.

Following the later decision, the Tribunal held that as no term could be implied as to the reasonableness of the length of lay-off, there was therefore no breach of contract/potential constructive dismissal. And even if a term like this could be implied, the employer had not exceeded a reasonable period on the facts.

The EAT dismissed the appeal. The statutory scheme balanced the rights of employers and employees in circumstances where both were adversely affected by a short-term downturn in business. It provided for a four-week period, during which there was no entitlement to claim a redundancy payment. If an employee could make a claim for constructive dismissal after four and a half weeks, this would negate the purpose of the statutory scheme.

In any event, even if there was an implied term that a lay-off would be no longer than was reasonable, there would have to be very good reasons for finding that a period matching the statutory four weeks did not meet this.

There was no evidence here that the employer had behaved in a way that might breach its trust and confidence duty. This was a genuine lay-off – there was no question of the employer trying to replace the workforce with cheaper labour or manipulating the rules for its own economic benefit. The proprietor of the business had kept in touch with employees, reassuring them that no one was sacked or being made redundant and that when orders started flowing he would let them know.