Fentem v Outform EMEA Ltd - Unfair dismissal: resignation into dismissal

The Employment Appeal Tribunal was asked to consider whether or not the claimant was dismissed by the respondents’ actions in terminating his employment early during his notice period, which he was serving as a result of his resignation. 

LAW 

Section 95 Circumstances in which an employee is dismissed Employment Rights Act (ERA) 1996

(1) For the purposes of this Part an employee is dismissed by his employer if (and, subject to subsection 

(a)the contract under which he is employed is terminated by the employer (whether with or without notice),

(b)he is employed under a limited-term contract and that contract terminates by virtue of the limiting event without being renewed under the same contract, or

(c)the employee terminates the contract under which he is employed (with or without notice) in circumstances in which he is entitled to terminate it without notice by reason of the employer’s conduct.

(2)An employee shall be taken to be dismissed by his employer for the purposes of this Part if—

(a)the employer gives notice to the employee to terminate his contract of employment, and

(b)at a time within the period of that notice the employee gives notice to the employer to terminate the contract of employment on a date earlier than the date on which the employer’s notice is due to expire;

and the reason for the dismissal is to be taken to be the reason for which the employer’s notice is given.

Marshall (Cambridge) Ltd v Hamblin 

Where a contract of employment includes the right for the employer to pay salary in lieu of notice, the employee has no right to work out his notice.  

FACTS 

The claimant resigned in April 2019, with nine months’ notice. As such, his employment was due to end in January 2020. However, in December 2019 the respondent invoked a payment in lieu of notice (PILON) clause in his contract, which allowed them to:

“Terminate the employee’s employment forthwith.”.

The claimant’s salary was paid in full (excluding bonuses) to what would have been the end of his employment. 

Following this, the claimant brought an unfair dismissal claim.

EMPLOYMENT TRIBUNAL (ET)

As a preliminary issue, it was necessary for the ET to determine whether or not a dismissal had, in fact, taken place. Relying on Marshall, the ET held that by invoking this clause, it was not a dismissal in law. 

In invoking the PILON clause, all that was changed was date of termination. This action did not have the effect of turning the resignation into a dismissal, and as such no dismissal had taken place. This is despite the wording of section 95 ERA, which states:

“The contract under which he is employed is terminated by the employer (whether with or without notice).”.

This was appealed. 

EMPLOYMENT APPEAL TRIBUNAL (EAT)

Whilst the claimant accepted the ETs reliance on Hamblin, he argued it should not be followed. This would effectively mean that the EAT would be declaring their own decision ‘manifestly wrong’, i.e., that it was plain to see that it was obviously wrong, without the need for an extensive explanation as to why. 

The claimant based his argument on the wording of section 95 ERA, within which he claimed his dismissal clearly fell. He had been employed under a contract, and that contract was terminated, as a result of a unilateral act by his employer, regardless of the fact that he had resigned 8 months previously. 

In dismissing the appeal, the EAT clearly showed some discomfort with the decision in Hamblin and it’s effect that employers can cause employment to end earlier than intended without a breach of contract or dismissal. However, it could not be said to be ‘obviously wrong’ without a detailed analysis of the matter, and therefore was still binding on the EAT in this case. 

Note for employers 

This case offers reassurance to employers hoping to exit employees from the organisation earlier than the employee had intended, as long as there is a suitable PILON clause in place. This will be of particular use in situations where an exiting employee becomes ‘troublesome’ toward the end of their notice, and the employer decides it would be better simply to end the employment early. 

The wording of the PILON clause is particularly important, however. Should the early termination result in the employee missing out on benefits and bonuses that they would have received, had they been employed to the end, there is still a risk of a breach of contract, unless the PILON clause is worded sufficiently to stop this.

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