How effective is the termination?

Two cases this year have illustrated the importance of ensuring that dismissals are effected properly to avoid confusion and, in some cases, liability.

In Gisda CYF v Barratt, Miss Barratt was dismissed by her employer, the charity Gisda CYF (“Gisda”).

Miss Barratt was suspended on 19 October 2006, pending an investigation into her conduct. Gisda invited her to a disciplinary meeting on 28 November, and told Miss Barratt to expect to hear their decision by post by 30 November.

Gisda wrote a letter to Miss Barratt and posted it by recorded delivery on 29 November. The letter confirmed Gisda’s decision to dismiss Miss Barratt summarily.

Miss Barratt was away visiting her sister on 30 November, and so was not at home when her boyfriend’s son signed for the letter. Miss Barratt returned home on 3 December, late in the evening. She eventually opened the letter on 4 December.

Miss Barratt made a claim for unfair dismissal. The claim was submitted on 2 March 2007.

Under the Employment Tribunal rules, claims for unfair dismissal must be brought within three months of the effective date of termination. Gisda considered that the claim was brought out of time, and made an application for Miss Barratt's claim to be struck out on the basis that the Tribunal did not have the jurisdiction to hear it.

The Tribunal found that an employee needs to read the letter of dismissal (or have a reasonable opportunity of reading it) for the dismissal to take effect.

Gisda appealed the decision to the EAT, which agreed with the Tribunal, and then to the Court of Appeal. The Court of Appeal also agreed with the Tribunal, so this finding on a preliminary issue went before the Supreme Court.

The Supreme Court agreed with all of the decisions by the lower courts in relation to this case. It held that Tribunals needed to take into account the “human dimension” when considering what is reasonable to expect of someone facing dismissal. Miss Barratt should not “be condemned, therefore, for failing to give instructions that the letter should be opened and read to her during the weekend she spent with her sister”. Clearly, however, if an employee deliberately avoids reading a letter that they know will contain bad news, they will not be able to benefit from a delayed date of dismissal.

The Supreme Court also said that it would be unfair for the limitation clock to start running before an employee knows or has had a reasonable chance of discovering that they have been dismissed. The Court took into account that in some cases, employees may seek interim relief, but they need to do so very shortly after the dismissal. To hold that the dismissal can take effect before the employee has discovered it could deprive them of this right.

As such, Miss Barratt’s claim was brought in time and Gisda was forced to defend it.

Another case, Geys v Societe Generale, also deals with when dismissals can take effect. This case illustrates why delayed termination dates can be costly.

Mr Geys was employed by Societe Generale (the “Bank”). He had negotiated a bonus which was not discretionary, but which would be payable provided he remained an employee of the Bank for the whole of the calendar year.

Mr Geys was entitled to three months’ notice of termination of employment. The Bank also had the right to terminate Mr Geys’ employment without notice, and to make a payment in lieu of notice.

On 29 November 2007, Mr Geys was told that the Bank had decided to dismiss him with immediate effect. Importantly, the Bank did not mention that he would be paid in lieu of his notice. Mr Geys left the Bank’s premises immediately, and did not return to work.

Following his dismissal, on 18 December, the Bank made a payment directly into Mr Geys’ bank account but did not tell Mr Geys what this payment was for.

On 2 January 2008, Mr Geys’ solicitors wrote to the Bank. They claimed that the Bank had no right to breach Mr Geys’ contract by summarily dismissing him. They claimed that Mr Geys remained an employee until his notice period expired at the end of February 2008 and reserved Mr Geys’ position in relation to the money paid into his bank account. The Bank then sent Mr Geys a letter which set out the arrangements relating to the termination of his employment. It stated that the money credited to his account on 18 December 2007 was in lieu of Mr Geys’ notice period.

If the Bank was right, Mr Geys had been effectively dismissed either on 29 November, or alternatively when the payment was made on 18 December 2007. If Mr Geys was right, he remained an employee in January 2008 and became entitled to a bonus for the previous year.

The High Court decided that, in circumstances where Mr Geys had affirmed the contract (in other words, had refused to accept the breach of contract), the Bank's purported dismissal at the end of November was ineffective. This was merely the date that notice was given.

As the Bank had not made clear that the money it paid into Mr Geys’ bank account was a payment in lieu of notice, paid pursuant to the terms of his contract, it could not rely on the payment date as constituting the date on which the contract was lawfully terminated. Instead, the Court held that dismissal had not taken place until the deemed delivery of the Bank’s standard HR letter (clearly conveying its decision to terminate the claimant's employment by making a payment to him in lieu of notice) on 6 January 2008.

By failing to mention that it intended to make a payment in lieu of notice and therefore to terminate the contract lawfully, the Bank owed Mr Geys his bonus for the whole of 2007 – a bonus which amounted to around €2.5m.

Comment

It may well be that you are not likely to be liable for seven figure bonuses if you do not dismiss your employees before the year end. However, the effect of these cases is wider than their facts suggest. If an employee has less than a year’s service, they could use the principles established in either of the above cases to accrue unfair dismissal rights. In particular, if an employer does not have an express right to pay in lieu of notice, they could be at risk of not being able to dismiss an employee who refuses to go until the end of the notice period.

Therefore, employers should:

• communicate the decision to dismiss verbally in the first instance (and take a note of that conversation);
• confirm the decision in writing (for evidential purposes if nothing else);
• make the arrangements for the termination clear in the dismissal letter and specifically refer to any contractual provisions on which the employer is relying.