Craig v Lindfield & Son Ltd UKEAT/0220/15/LA
Appeal against a finding that the Claimant had not been constructively unfairly dismissed in circumstances where the Respondent had a contractual right to lay-off staff for an indefinite period and had laid-off the Claimant without pay for a period of just over four weeks. Appeal dismissed
The Claimant was employed by the Respondent as a draughtsman from October 2004 until August 2014, when he resigned and claimed constructive unfair dismissal following a four week period when he was laid-off without pay. He claimed that the lay-off had extended for a period longer than was reasonable and that the Respondent was accordingly in repudiatory breach of contract, notwithstanding the Respondent's express contractual right to lay off staff for an indefinite period without pay. The Tribunal held that no term could be implied as to the reasonableness of length of lay-off, there was no repudiatory breach of contract and accordingly no constructive dismissal. In the alternative, even were such a term to be implied, the Respondent had not exceeded a reasonable period on the facts of the case. The Claimant appealed on the grounds that the Tribunal was wrong to conclude that the lay-off clause was not subject to a term that lay-off should be no longer than was reasonable and that it further erred in concluding that four and a half weeks was not an unreasonably long period.
The EAT dismissed the appeal. Parliament had provided a statutory scheme for balancing the rights of employers and employees in circumstances where both were adversely affected by a short-lived downturn in business. That scheme provided for a four-week period, during which there was no entitlement to claim a redundancy payment, which left little room for any term implied by common law to operate. In any event, even were there an implied term that a period of lay-off would extend no longer than was reasonable, Parliament had set out a four-week benchmark, from which "there would have to be cogent, well-evidenced reasons to depart" and there were no such reasons in this case.
Tim Crane, Employment Law Solicitor
Appeal No. UKEAT/0220/15/LA
EMPLOYMENT APPEAL TRIBUNAL
FLEETBANK HOUSE, 2-6 SALISBURY SQUARE, LONDON EC4Y 8AE
At the Tribunal
On 20 November 2015
THE HONOURABLE MR JUSTICE LANGSTAFF (PRESIDENT)
MRS R CHAPMAN
MS G MILLS CBE
LINDFIELD & SON LTD (RESPONDENT)
Transcript of Proceedings
For the Appellant
MR ANDREW WATSON (of Counsel)
Michael Foster Law
Lacuna Place - Havelock Road
For the Respondent
MR LINDFIELD (Representative)
CONTRACT OF EMPLOYMENT - Implied term/variation/construction of term
UNFAIR DISMISSAL - Constructive dismissal
The Claimant's contract of employment provided that for lay off and short-term working for an indefinite period, without pay. After four weeks lay off without pay, he resigned and claimed that he had been constructively dismissed because the lay off had gone on for longer than a reasonable period. An Employment Tribunal followed the decision of Kenneth MacRae v Dawson in preference to the earlier decision of Tiffen, and held that there was no term to be applied as to reasonableness so far as the length of lay off was concerned, but that if there had been the period was not unreasonable in all the circumstances of this case. There being no repudiatory breach of contract, there was no constructive dismissal.
An appeal was dismissed: Dawson should be followed unless obviously wrong, since it was later in time and had expressly considered Tiffen. It was in any event to be preferred. Parliament had provided a scheme for balancing the rights and interests of employer and employee on those occasions where both were adversely affected by a downturn in business (where at least the downturn was reasonably expected to be short-lived). That scheme provided for a four week period during which there would be no entitlement to claim a redundancy payment, and which left little room for any term implied by common law to operate, but after that time had passed it left the determination of whether it was unreasonably long to the employee. In any event, if there were an implied term that a period of lay off would be no more than was reasonable, legislation set out a four week standard from which there would have to be cogent well evidenced reasons to depart, and there were no such reasons in the present case.**THE HONOURABLE MR JUSTICE LANGSTAFF (PRESIDENT)****Introduction**
- A contract of employment is often described as a wage/work bargain. The essence is that the employer provides his money for work and the employee provides his work for money. It will thus almost always be a breach to pay less than has been promised, or to take pay for work that has not been or is not then done. Moreover, if there is such a breach, it will almost inevitably be repudiatory. Sedley LJ said words to that effect at paragraph 28 of his leading Judgment in Buckland v Bournemouth University Higher Education Corporation  EWCA Civ 121. If the employer commits a repudiatory breach, the employees affected by it have the option no longer to be held to their bargain unless they choose to be. If they choose not to be, they may claim that they have been constructively dismissed. It is clear, however, that there must first be a breach and that the breach must be repudiatory. In Tullett Prebon plc v BGC Brokers LP  EWCA Civ 131 the test of what is repudiatory expressed in its modern form is that the contract breaker has clearly shown an intention to abandon and altogether refuse to perform its part of the contract of employment.
- However, a contract remains a bargain which the parties have agreed between themselves. If as part of that bargain they recognise that there are some circumstances in which no money will be paid, no work done, or both, then a failure of the employer to pay the employee in such circumstances will be no breach. Non-payment is not then a breach of the contract: it is indeed contractually provided for. If a contract provides that where there is a lack of work the employer may lay off the employee or put him on short-time working with or without pay, it is then no breach to do so, let alone a repudiatory one. There is an alternative to placing an employee on lay-off or short-time working: the employer may dismiss for redundancy. That is an alternative recognised by statute in dealing with the entitlement to a redundancy payment conferred by Part XI of the Employment Rights Act 1996 ("ERA"). Within that Part, section 135, headed "The right", provides:
"(1) An employer shall pay a redundancy payment to any employee of his if the employee -
(a) is dismissed by the employer by reason of redundancy, or
(b) is eligible for a redundancy payment by reason of being laid off or kept on short-time."
This provides for two occasions only when an employee may be entitled to a redundancy payment. The implication of the statutory words is that an employee is not entitled to a redundancy payment in any other circumstance.
- Eligibility for a redundancy payment by reason of being laid off or being kept on short-time (under section 135(1)(b)) is dealt with under Chapter III of Part XI in sections that are of particular importance to this appeal and to which we shall come.
- Dismissal for redundancy, if that option is chosen, may serve neither the interests of an employer nor those of its employees. The employer will lose staff it relies on to do work, who are experienced in doing it, and who may have specialist skills. It may particularly wish to retain such employees if the work is specialist, both because it will need to have such employees available for work when, as it hopes, the work picks up again, and because it would be put to some expense to lose them, since it would have to pay the amount of any redundancy payment to which they would be entitled if dismissed. The employees on their part will lose jobs they may value, together with the continuity of employment that brings with it a number of important statutory rights, and be thrown upon the uncertainties of the labour market at a time when the more particular their skills are and the more particular the niche that his employer has in the marketplace the more likely it is that the downturn in work will have affected similar employment with similar employers, thus making an alternative job for the employee all the more difficult to secure. At least where it is anticipated that the downturn in work will not last for long, it may therefore be in the interests of both employer and employee that provisions as to lay off and short-term working should be effective, and should not generally be regarded as a breach of contract, let alone as repudiatory, not least since they are provided for by express contractual terms.
- This appeal, against a decision of Employment Judge Harris sitting at London (South), Reasons for which were given on 29 March 2015, brings into focus a difference of view expressed in two appeals in the early 1980s on the question whether a period of lay off and short-term working might, notwithstanding the statutory provisions, continue for so long as to be a repudiatory breach of contract, since it would necessarily deprive employees of ongoing pay that might be of the greatest importance to those employees and those dependent on them.
- In A Dakri & Co Ltd v Tiffen  ICR 256 the EAT thought that a contractual term that a period of lay off should not extend beyond that which was reasonable was to be implied. In the submission of Mr Watson, who appears for the appellate Claimant before us, this was as an incident general to most contracts of employment which provide for lay off and short-term working.
- A different view as to the nature of this term (if it existed at all) was expressed in the later case of Kenneth MacRae & Co Ltd v Dawson  IRLR 5. Whereas the former was a decision of the Appeal Tribunal sitting in England, Judgment in which was expressed by Mr Gough, one of the lay members of that Tribunal, the latter was a decision of the Appeal Tribunal sitting in Scotland, the decision being given in a Judgment of Lord McDonald. The fact they arose on different sides of the border is irrelevant: being decisions of this Tribunal, they are of equal standing. In general, however, this Tribunal would wish to follow a previous decision in the same general area as a matter of comity. Where there are two decisions, the later of which has expressly considered and departed to some extent from the earlier decision, the convention is that this Tribunal will normally follow the later decision unless persuaded that it was in error. Mr Watson does not dispute those propositions.
- The question before us is whether, in the circumstances of this case, the Judge was entitled to reject the claim by the Claimant that he had been constructively unfairly dismissed by the employer in circumstances in which there had been a genuine drop-off in work that had led to his employer operating a clause in his contract permitting there to be a lay off for an indefinite period, where the lay-off led to an absence of pay for just over four weeks. The effect of his claim if successful would be that he would be entitled not only to an amount equivalent to a redundancy payment as a basic award for unfair dismissal, but would also be entitled to a payment of what would otherwise have been his wages during the period of notice and, it may be, further and consequential damages as appropriate to a claim of unfair dismissal. He would not therefore be restricted to the amount of a redundancy payment; he would, he claims, be entitled to receive rather more.
- The circumstances in which these proceedings arose are as follows. The Claimant worked as a computer-aided designer/draughtsman in the Respondent design and technology company from October 2004 until August 2014, when he submitted his resignation. The contract of employment into which he had entered incorporated the employee handbook. It is not now disputed that that handbook provides a contractual right for the employer to lay off staff or require them to work short-time in circumstances where there was a drop in work. Indeed, the employer had on two earlier occasions suffered periods when work had diminished such that short-term working occurred, between July and September 2009 and between November 2012 and July 2013.
- In the summer of 2014 there was again a further downturn in business. In mid-July the Respondent told the Claimant and other employees that they would be laid off with effect from 21 July. They received no pay other than a statutory guarantee payment. The proprietor of the Respondent, a Mr Lindfield, expressed the hope that work would soon pick up again. He kept in touch with employees, reassuring them that no one was sacked, that no one was being made redundant and that when orders started flowing he would let them know. On 22 August 2014 the Claimant sent an email to Mr Lindfield to tell him that he, the Claimant, had found a new job which he would be starting on 1 September. He stated that having been laid off for five weeks without pay he assumed that he had been made redundant and was entitled to a redundancy payment. This was seen by the employer as being in line with the rights provided under Chapter III of Part XI of the ERA 1996. They provide that an employee is eligible for a redundancy payment by reason of being laid off or kept on short-time if (by section 148):
(a) he gives notice in writing to his employer indicating (in whatever terms) his intention to claim a redundancy payment in respect of lay-off or short-time … and
(b) before the service of the notice he has been laid off or kept on short-time in circumstances in which subsection (2) applies.
(2) This subsection applies if the employee has been laid off or kept on short-time -
(a) for four or more consecutive weeks of which the last before the service of the notice ended on, or not more than four weeks before, the date of service of the notice, or
(b) for a series of six or more weeks (of which not more than three were consecutive) within a period of thirteen weeks, where the last week of the series before the service of the notice ended on, or not more than four weeks before, the date of service of the notice."
The Claimant here, having had the requisite period of four weeks, was therefore entitled to serve a notice claiming a redundancy payment.
- Section 149, headed "Counter-notices", provides for an exclusion from that right, which it is for the employer to claim. It is in these terms:
"Where an employee gives to his employer notice of intention to claim but -
(a) the employer gives to the employee, within seven days after the service of that notice, notice in writing (referred to in this Part as a "counter-notice") that he will contest any liability to pay to the employee a redundancy payment in pursuance of the employee's notice, and
(b) the employer does not withdraw the counter-notice by subsequent notice in writing, the employee is not entitled to a redundancy payment in pursuance of his notice of intention to claim except in accordance with a decision of an employment tribunal."
- Section 150 is headed "Resignation". This represents the next series of steps in the process. It provides, so far as material, as follows:
"(1) An employee is not entitled to a redundancy payment by reason of being laid off or kept on short-time unless he terminates his contract of employment by giving such period of notice as is required for the purposes of this section before the end of the relevant period.
(2) The period of notice required for the purposes of this section -
(a) where the employee is required by his contract of employment to give more than one week's notice to terminate the contract, is the minimum period which he is required to give, and
(b) otherwise, is one week.
(3) In subsection (1) "the relevant period" -
(a) if the employer does not give a counter-notice within seven days after the service of the notice of intention to claim, is three weeks after the end of those seven days,
(b) if the employer gives a counter-notice within that period of seven days but withdraws it by subsequent notice in writing, is three weeks after the service of the notice of withdrawal, and
(c) if -
(i) the employer gives a counter-notice within that period of seven days, and does not so withdraw it, and
(ii) a question as to the right of the employee to a redundancy payment in pursuance of the notice of intention to claim is referred to an employment tribunal, is three weeks after the tribunal has notified to the employee its decision on that reference."
- The provisions of further relevance to the current argument include section 152, headed "Likelihood of full employment". That provides:
"(1) An employee is not entitled to a redundancy payment in pursuance of a notice of intention to claim if -
(a) on the date of service of the notice it was reasonably to be expected that the employee (if he continued to be employed by the same employer) would, not later than four weeks after that date, enter on a period of employment of not less than thirteen weeks during which he would not be laid off or kept on short-time for any week, and
(b) the employer gives a counter-notice to the employee within seven days after the service of the notice of intention to claim.
(2) Subsection (1) does not apply where the employee -
(a) continues or has continued, during the next four weeks after the date of service of the notice of intention to claim, to be employed by the same employer, and
(b) is or has been laid off or kept on short-time for each of those weeks."
- The minimum period of time laid-off before an employee will be entitled to receive a redundancy payment if it is not voluntarily offered by the employer is thus the sum of a period of four weeks on lay-off or short-time working, after which he must give a section 148 notice, together with the period of four weeks under section 152(2): a total of 8 weeks.
- The periods referred to in section 150(3) contain three different possible scenarios. It is plain to us that the section is highly prescriptive. Parliament plainly directed its mind to the possible circumstances in attempting to draw what it saw as a proper balance between the rival interests of both employer and employee when both were suffering the ill-effects of a downturn in business, no doubt from external causes.
- In reply to the email of 22 August the employer expressed a hope to resume work soon. What it said provoked the response from the Claimant that because he had been laid off for more than four weeks he was entitled by law to claim redundancy. He then added this:
"… As you are refusing to accept this I have no alternative but to go to ACAS and begin early conciliation which could lead to a tribunal for constructive dismissal."
- The response of Mr Lindfield was speedy. On the same day he stated that he had no intention of making the Claimant's position redundant because he needed a CAD designer within the company. He therefore gave the counter-notice that statute refers to.
- On 15 September he wrote to say it had not been clear from the Claimant's email of 22 August whether he was resigning or not. The Claimant, however, plainly did resign; the Tribunal thought that email was a resignation letter, and indeed the Claimant subsequently brought his claim for constructive dismissal to the Tribunal.
- The Tribunal was addressed on the basis that the case of Tiffen was to be preferred to the later case of Dawson. Those two cases are central to our discussion. Tiffen, a decision of the Appeal Tribunal presided over by Bristow J, concerned an employee who worked in the rag trade. There was a severe recession. Her contract entitled her employer to lay her off temporarily and without remuneration. Having laid the employee off, the employer made no attempt to keep in touch with her. After she had been laid off for four weeks she notified the employer of her intention to claim redundancy. That was under the provisions of what she referred to as section 5 of the Redundancy Payments Act, though by the time the matter came to the Tribunal at any rate, if not at the time of the events it was considering, they were contained in the statutory predecessors to the Employment Rights Act 1996 ("ERA"), in particular as set out between sections 81 and 88 of the Employment Protection (Consolidation) Act 1978 ("EP(C)A"). The terms of those sections, though not entirely identical, are to similar effect to that of the provision currently contained in the ERA. They set out an identical timetable and process.
- The Tribunal concluded that the word "temporarily" was critical and that a lay off that lasted for as long as four weeks and a few days could not be said to be temporary. The Appeal Tribunal rejected that reasoning; any "lay off" was by definition temporary, and the word "temporarily" added nothing. It was on that basis that the Industrial Tribunal in that case had found in favour of the Claimant and provided her with a sum equivalent to the redundancy payment she would otherwise have received. On appeal it was argued for the employer that the Industrial Tribunal should have been guided by the Parliamentary provisions. The Appeal Tribunal said (page 260C):
"… Unless a time was specified in the contract, then the law implies that the lay off is to be for not more than a reasonable time. What is a reasonable time is a question of fact for the fact finding tribunal, here the industrial tribunal. …"
- In the penultimate paragraph it said this (page 260D-E):
"In our judgment, in the context of this trade and employees paid at the modest rates enjoyed by these employees, and so unlikely to have savings sufficient to support them through a long wage-less period, four weeks is the longest reasonable time for the purposes of their contracts for these employees to remain workless and payless without this being a fundamental breach of contract on the employer's part. Accordingly by the effective date of receipt of the application to the central office of industrial tribunals the employers were in breach, and we think that, inelegant though its terms are, the issue of the application shows an intent to treat the contract of employment as at an end. …"
- The effect was that the Claimant was entitled to the redundancy payment without having gone through - indeed, having failed to follow - the procedure prescribed by the EP(C)A.
- Dawson was a case arising out of the building industry, where there were provisions agreed nationally which provided for temporary lay off. The contractual right was to lay off the Respondent for an indefinite period. There was a detailed argument before Lord McDonald and his panel as to the interaction of the common law with the statutory provisions in the 1978 Act. It was submitted to the Appeal Tribunal that the decision in Tiffen was wrong and should not be followed. Lord McDonald commented that neither of the Tribunal lay members nor either of the two very-experienced practitioners who appeared were able to think of examples in industry of prolonged but definite periods of lay off that were envisaged by the argument in that case for the employer. He was plainly concerned with what the real intent and purport was of section 88, the predecessor of the provisions that we have to consider here, and then said at paragraph 10 of the Judgment as follows:
"10. We have decided that where, as here, an employer has a contractual right to lay off indefinitely he is, in the normal case, not to be regarded in breach of his contract simply by virtue of the passage of time. If the employee thinks that too long a time has elapsed his remedy is under s.88 of the 1978 Act. That the provisions of this section are tortuous and fraught with pitfalls is regrettable but nothing to the point. In the present case no attempt was made by the respondent to follow the procedure under s.88. We cannot therefore hold that, in the circumstances of this case, the appellants were in such fundamental breach of the contract of employment as to entitle the respondent to claim that he was constructively dismissed. For these reasons, we propose to allow the appeal and substitute a finding that the respondent is not entitled to a redundancy payment."
- We note that the period of time involved in that case was some five weeks. At paragraph 11 he went on:
"11. It follows from this reasoning that we are relieved of the need to decide what, in the circumstances, was a 'reasonable' period of lay off before the appellants put themselves in breach of contract. We do not exclude a situation in which this might arise. We think that it may have arisen in the case of [Tiffen]. In that case the employee had sought to invoke the s.88 procedure. There were facts to suggest that it may have been thwarted by an unreasonable attitude on the part of the employers. Insofar as the judgment suggests that in every case s.88 can be ignored in favour of an overall test of reasonableness we would respectfully disagree with it. We do not think, however, that on the peculiar facts of that case the decision is in conflict with ours. We note that in [Tiffen] leave to appeal was granted but not followed up. If either party wishes leave to appeal to the Court of Session in this case, it will be granted." (Emphasis added)
It does not appear that any appeal was pursued, despite these last words.
- The Tribunal in the appeal before us at paragraph 30 thought that at first sight Dawson conflicted with Tiffen. It drew particular attention to the words that we have italicised above. It concluded that the contractual right to lay off was well understood by both employer and employee in the present case. It thought, having regard to Dawson, that a contractual right to lay off was not subject to a test of reasonableness (paragraph 36):
"36. … If an employee thinks that the time he/she has been laid off for is too long, then their remedy lies in making a claim for a redundancy payment. Similar conclusions are to be drawn in this case. …"
- It observed (paragraph 39) that because the Claimant in this case had not adhered to the detailed statutory requirements, he was not pursuing a claim for a redundancy payment under them. However, that did not mean that he could now found a claim for constructive unfair dismissal in the alternative.
- Thus the first strand in its reasoning was to hold that there was no requirement that the period of lay off should only be for a reasonable period of time. Its second ground for decision followed at paragraph 40:
"40. Further and in the alternative, even if I were to follow the judgement of the EAT in … Tiffen, I am not persuaded that at the point at which the Claimant resigned on 22 August 2014, the Respondent had exceeded the reasonable period of time under which it could lay off the Claimant. …"
Reminding itself that the question of what period of time was reasonable was a question of fact, it then went on to explain its view. In doing so, it took account of the short period - just a few days over the four-week period; that in contrast to the employee in the Tiffen case, the Claimant had been provided with updates from his employer throughout; that this was not the first period of lay off or short-time working that he had endured during his employment; that he had resigned from employment on 22 August; and, looking at all the circumstances, as the Judge described it, "objectively":
"44. … the Respondent's actions in laying off the Claimant for four and a half weeks did not amount to a repudiatory breach of contract. Therefore the Claimant's resignation on 22 August 2014 did not amount to constructive unfair dismissal. …"**The Appeal**
- Both the central premises of that decision are challenged on appeal by Mr Watson on behalf of the Claimant, in an argument that displays considerable thought and energy. He argued first that, contrary to the approach apparently taken in Dawson, there was a term that was an incident of all contracts of employment which contained a clause permitting lay off and short-time working which required the period of lay-off to be for no longer than was reasonable. Secondly, he argued that assuming that either such a term, or a bespoke one, providing that the exercise of the power would be for no longer than was reasonable applied in this particular case the Judge erred in concluding that the period of four and a half weeks was not unreasonably long. He recognised that the latter argument was one of perversity but maintained that in this case the Judge's approach to his factual conclusion was in error because he took into account matters that were irrelevant to the decision he had to reach.
- He reminded us that in some contexts a court would properly import a standard term as a necessary incident of a particular type of contract. The distinction between a general rule of this type and a bespoke implied term was identified in Liverpool City Council v Irwin  AC 239 (see in particular the speech of Lord Wilberforce at page 254, by reference to Lister v Romford Ice and Cold Storage Co Ltd . Necessity was a requirement.
- In the second case to which he took us on this theme, that of Scally and Ors v Southern Health & Social Services Board and Anor  ICR 771, the House of Lords considered an employment contract. The issue was whether the employer was bound by a contractual term, which had to be an implied term since it was not expressed, obliging it to make people in the position of the Claimants aware of particularly favourable terms of pension to which they would be entitled if they only but knew it. Employees who had been denied those terms brought claims in both tort and in contract. Those in contract, succeeded, on the basis that a term was to be implied as claimed, as an incident of the contract; those in tort were dismissed. At page 781 Lord Bridge of Harwich in his speech identified a clear distinction between the search for an implied term necessary to give business efficacy to a particular contract and the search for such a term based on wider considerations leading to a conclusion that the law would imply such a term as a necessary incident of a definable category of contractual relationship. He recognised the need to be precise about the circumstances in which such a term would arise and set out the particular considerations in that case at the foot of page 781 to the top of 782. Again, he spoke of the implication being necessary.
- By way of contrast the third decision to which Mr Watson took us, that of Crossley v Faithful & Gould Holdings Ltd  ICR 1615, was one in which the claim that a term as to reasonableness was to be implied failed. The Claimant was absent from work due to his illness. He was entitled to the benefit of a PHI scheme providing he remained in employment. He had not appreciated that proviso. He retired, and only then did he find out about it. He claimed damages for breach of contract because he maintained that he ought to have been told by his employer that losing entitlement to PHI benefits would be the consequence of his retiring. Dyson LJ at paragraph 33 expressed the view that the Judge had been right to reject the submission that there was a portmanteau obligation that there was an implied term in every contract of employment that the employer would take reasonable care for the economic well-being of his employee. He said, with obvious approval of a passage in Anson's Law of Contract, that the courts will consider how a proposed implied term will sit with existing law and will affect the parties to the relationship and wider issues of fairness by saying at paragraph 36:
"36. It seems to me that, rather than focus on the elusive concept of necessity, it is better to recognise that, to some extent at least, the existence and scope of standardised implied terms raise questions of reasonableness, fairness and the balancing of competing policy considerations: see Elisabeth Peden "Policy Concerns behind Implication of Terms in Law"  117 LQR 459, 467-475. …"
- He thought that such considerations were reflected in recent significant developments in the field of the employer/employee relationship. One of the cases he mentioned as an example of such a development was that of Johnson v Unisys Ltd  ICR 480. Johnson was shown to us by Mr Watson too. That was a case in which the Claimant employee wished to pursue a claim for damages for personal injury before a common law court. He contended that he had been caused injury by being dismissed. The court concluded this was impermissible, in terms that are now so well known and notorious that we need hardly repeat them, to the effect that the ERA provided a statutory cap for compensation for unfair dismissal, such compensation itself being assessed on the basis of that which was fair and equitable. The bringing of a claim arising out of dismissal in the County Court therefore had the effect of circumventing the statutory cap; it could not properly do so. The claim was based on an implied term of the contract of employment that the employer would not without reasonable and proper cause conduct itself in a manner calculated and likely to destroy or seriously damage the relationship of trust and confidence: but this could not succeed, since the common law had to be read as subject to the statutory provisions relating to unfair dismissal. The effect was such that in so far as a claim relied upon the act of dismissal, for which there was separate statutorily provided compensation, it must fail before a civil court.
- In the case of Tiffen, submitted Mr Watson, the Tribunal was implying a standardised term of the Irwin and Scally types. The court had to have in mind that the contractual right to lay off was an exception to the essential principles underlying a contract of employment with which we began this Judgment: that employees had little or no bargaining power, particularly where contracts in conventional terms were put to them upon first employment; and that it was well accepted that the concept of reasonableness could be part and parcel of a standardised implied term, as was the requirement to take reasonable care accepted in the Irwin case. The fact that a scheme for conferring entitlement to redundancy payments was set out in statute did not prevent the Appeal Tribunal from implying such a term. The statute related to a different question, that of the entitlement to a redundancy payment; it did not necessarily cut across the right of a Claimant to point to a repudiatory breach upon the basis of which he could claim to have been constructively dismissed. The scope of the contractual right to lay off and the question of whether a laid off employee could claim a statutory redundancy payment overlapped but were ultimately separate questions. The present case was distinguishable from the decisions in Johnson and Edwards v Chesterfield NHS Trust  ICR 201. The distinctions were that Johnson was not dealing with the implication of a term in the first place, but rather the operation of a term which was acknowledged to apply, and the provision in respect of lay off did not cover precisely the same ground. Given that, the case of Dawson should not be followed.
- In the alternative, Mr Watson argued that the principle upon which Attorney General of Belize v Belize Telecom Ltd  1 WLR 1988 was decided by the Privy Council was that a contract meant that which it would convey (per Lord Hoffmann):
"16. … to a reasonable person having all the background knowledge which would reasonably be available to the audience to whom the instrument is addressed …"
If therefore the term here was not to be held to be a standardised implied term, incidental to a contract of this type, this contract should be so interpreted.**Discussion**
- We do not accept that there is real scope here for a contractual provision to be implied as to the length of time for which it is reasonable for there to be lay off and short-term working. We acknowledge that there is ample scope for the operation of contract and for the law relating to repudiatory breach if, in handling a process of laying off staff or introducing short-term working, an employer is in breach of other contractual obligations to his employees. We regard it as essential that in general any lay off effected under a contractual power must be what one might describe as a genuine lay off. The lay members are clear that there are occasions in today's world where there is a strong incentive for an employer to replace a qualified, experienced and loyal workforce with workers who will work for less but who may be equally qualified, as for instance by the employer taking advantage of posted workers, who are paid in a country of work where wages are generally high that which they would have been receiving for such work in their country of origin where wages are generally lower. However, this is not such a case. Nor is it one of those cases in which there is any suggestion that the employer has manipulated the lay off or short-term provisions for its own economic benefit, at the expense of its employees. If it had done so, this would have been a very different case. Nonetheless, we wish to make it clear at the outset that what we have to say does not altogether prevent employees making good a claim for constructive dismissal arising in relation to a lay-off. All must depend upon the particular circumstances.
- We have concluded as we do for these reasons. Where there is a real prospect of there being fresh work for the employer and its employees, it is likely to be in the interests of neither for there to be wholesale redundancies and likely that it is in the interests of both that there should be lay off or short-time working. It is not difficult to see why lay offs and short-time may cut against the essential elements of the wage/work bargain, but it does not wholly defeat the principal object of the contract agreed between the parties for it also to be agreed that if the enterprise in which both have a stake and provides both with a livelihood falls on hard times there should for a period be neither work nor pay. The question whether there comes a time when the lay off or short-time working has gone on for so long that the employer should choose redundancy and lose his employees, or free them, as they may see it, so they may seek fresh employment elsewhere, is one to which Parliament, as it seems to us, has given some answer in what is now Chapter III of Part XI of ERA. The scheme of the Act may be prescriptive, but it begins with a choice. The choice is for the employer: either to pay a redundancy payment, or to lay off employees or keep them on short-time working. As we say, that must be with a realistic expectation that there may be some further work and not solely to evade his responsibilities to pay.
- If, however, he chooses the latter, as happened in this case, in circumstances where, as in this case, he was contractually entitled to, it seems to us that Parliament has set out the appropriate balance between the rights of the employees and the interests of their employer. Plainly, a drop-off in work results in a reduction in the needs of the business concerned for work to be done of a particular kind or in a particular place. This meets the statutory definition of redundancy. If employees are dismissed for redundancy in these circumstances, their dismissal will almost inevitably be fair, subject only to procedural questions and appropriate selection for dismissal. A person in the position of the Claimant would thus receive a redundancy payment if dismissed. Unless dismissed, however, he would not automatically have any such entitlement: his only hope would be of resigning and persuading a Tribunal that he did so in circumstances amounting to a constructive dismissal. Unless regulated by statute, this could create uncertainty for both employee and employer: the first, risking that he might not be entitled to such a payment; the second that he might be ordered to pay one, with both having the expense of claiming or, as the case may be, resisting such a payment. It is in such circumstances that the effect of the provisions under Chapter III is to postpone any entitlement to such a redundancy payment for at least four weeks, but to recognise that the employee should increasingly be put in control as to when after that the entitlement should accrue. Thus after four weeks the employee may enter a notice claiming a redundancy payment and seek to be paid. For the four weeks next after a notice there is a different balance to be struck: the employer may be able to resist a claim for payment, but only where the prospects at the time of the notice were not only of an upturn in work but an upturn to such an extent that a reasonable period of full-time working was probable thereafter; but time is running out for him, given the provisions of section 152(2). The statute provides for greater certainty for both.
- In general terms, this scheme leaves it to an employee to decide whether he still has sufficient interest in working for his employer's business as not to serve the notice which he is entitled to serve. However, being a matter of statute, the provisions apply whatever the contract provides as to the permissible duration of lay off and short-time working may be. If for instance the contract provided for three months as a maximum period of lay off, nonetheless the employee would have his rights under the Act to issue a notice seeking a redundancy payment after four weeks.
- It seems to us therefore that Parliament has stepped in, to determine the rights of both parties in these difficult economic circumstances, as indeed was recognised by Lord McDonald in the Dawson case. We find the decision in Tiffen surprising. It is surprising because the Claimant was held entitled to a redundancy payment though she had not gone through the steps that Parliament had decreed a person had to go through in order to claim just such a payment and, by imposing that requirement for a Claimant to go through that process, suggesting that there was no other route. What is a reasonable time for lay-off to persist is thus in part provided for by Parliament: by provisions arguably favouring the employer during the initial four weeks, but for periods beyond that in essence leaving matters up to the employee. Before us Mr Watson had, as we see it, no really effective answer to the conundrum posed by this case: if the Claimant was entitled to make a claim for constructive dismissal after four and a half weeks, irrespective of having put in a claim under Chapter III of Part XI of the ERA, he would be entitled to a sum of money potentially above and beyond that which would have been in contemplation as a redundancy payment. This would tend to negate the purpose of the statutory provisions.
- We do not see there being any imbalance in particular between the positions of employer and employee, both of which are difficult at times when business declines, which would require an Employment Tribunal to have to pass judgment upon whether a particular length of time on lay-off or short-time working in particular circumstances is or is not reasonable: all the more so, when the contract provided for an indefinite period.
- Accordingly, bearing in mind that which Dyson LJ said in paragraph 36 of Crossley and that which he quoted from at paragraph 33 from Anson's Law of Contract (see above), we take into account as highly relevant how the proposed term sits with existing law (i.e. with the statute) would affect the parties to the relationship (whose respective positions we have described) and wider issues of fairness (which, as we have indicated, we hold that Parliament has considered when setting out a timetable and procedural template). All these considerations support the view expressed in Dawson, which we have echoed above.
- Accordingly, we do not consider that this is a case in which the view of the Tribunal as to whether the period of time laid off was objectively reasonable is relevant. In so holding, we accept and endorse the views expressed by Lord McDonald in the penultimate paragraph of Dawson, though we should, as we indicated, follow Dawson in the interest of comity in any event; far from being satisfied that it is in error, we have concluded that it is correct and that in so far as it expresses an overall test of reasonableness the decision in Tiffen is in error and is not to be followed.
- Though we have resolved the appeal by this conclusion, we turn to the second head of argument. If there were a term as to reasonableness, which a Tribunal was entitled to assess on a case by case basis, it would have to take into account a number of matters; as the Judge put it, "all the circumstances". Mr Watson has a point that the circumstances to which the Judge made particular reference in the paragraphs immediately preceding his conclusion were not obviously directly relevant to the question of the reasonableness of the length of time. He did, however, accept in argument that if the effect of the statute were not as we have thought it to be, and that the position here was not, as it might be put, analogous to the approach of Johnson when considering the interplay of statute and common law, nonetheless that statute would when it came to the assessment of reasonableness set a standard from which there would need to be a good ground to depart. The fact that the employer kept in touch here whereas the employer did not in Tiffen has a relevance, even though it is not a powerful factor, as it seems to us, in that it related to the availability and likelihood of work coming in to the undertaking. An employee would need to know, and should be told, what those possibilities were so that he might make an informed judgement whether to resign without redundancy pay, which would always be his option, or whether the employer was simply keeping him on lay off with no reasonable prospect of there ever being an upturn in work. (This latter would, in our view, be a breach of contract if it were established, because it would defeat the employee's potential entitlement to a redundancy payment there and then, and prevent him taking steps as best to secure his future.) Therefore we consider this factor is of potential relevance.
- The fact there had been previous occasions on which there had been a diminution in work, which did not involve a complete cessation of work, does not seem to us to be particularly relevant, nor does it seem to us to be relevant, if indeed the Judge was considering this at paragraph 42, that the Claimant had resigned or wished to resign in order to take up fresh employment. It was his entitlement to do so; it does not seem to us to affect the question of whether the period of time laid off was as between the two of them an unreasonable period, though it does perhaps suggest that the period of time would end on the date on which he indicated he had obtained the alternative work.
- The reasoning of the Tribunal was therefore vulnerable to arguments of the type that Mr Watson identified to us. However, we have seen no material put before the Judge that would or could have persuaded us that the standard indicated by Chapter III of Part XI of the ERA should be adjusted: there would have to be a compelling reason to bring the standard down or for that matter put it up from the periods of time that are there indicated, and we can see no such compelling reason in this case. Accordingly, though for slightly different reasons from those which appealed to the Tribunal, we consider it reached the right conclusion and would have rejected the appeal on the second ground too. The third ground was consequential and falls away.
- It follows that, despite the erudition of Mr Watson's argument, we have concluded that this appeal should be, and is, dismissed. We would add only this. We have throughout attempted to indicate our view that this case, like so many others in its field, is dependent upon its particular facts. We do not exclude that there may be facts that show that an employer has so behaved in and around the difficulties of a lack of orders or throughput of work, or for that matter for reasons purely of maximising his profit, in a way that falls foul of the obligation not without reasonable or probable cause to act in a manner calculated or likely to damage or seriously destroy the relationship of trust and confidence between them. If there is such a contention in any case, it will have to be considered on its facts. We can easily see situations in which there might, notwithstanding there being a period of lay off and short-term working, also be, at the same time, a viable claim for dismissal, albeit constructive. However, such a claim did not arise on the facts we have had to consider on the present appeal, which is dismissed.
Published: 07/02/2016 22:38