The EAT has upheld an employment tribunal’s decision that an employer who shortened the notice period of an employee who had resigned by paying salary in lieu had not dismissed the employee.
The facts
Mr Fentem was employed by Outform EMEA Limited. He resigned on 16 April 2019 by (in accordance with his contract) giving nine months’ notice, due to expire on 16 January 2020. However, on 19 December 2019, Outform invoked a clause in Mr Fentem’s contract of employment which stated that, where an employee resigns on notice, the company shall “at any time during the period of notice be entitled to terminate the employee’s employment forthwith” by paying salary in lieu in respect of the rest of the notice period. His contract terminated on 19 December 2019.
Mr Fentem later argued that he had been unfairly dismissed. The tribunal had to decide whether Outform’s actions in cutting short his notice period meant that the operative reason for the termination of his employment was a dismissal rather than a resignation.
Following earlier case law, the tribunal held that (in spite of the fact that his employer had cut short his notice period) the operative reason for the termination of Mr Fentem’s employment was his resignation. He had not therefore been dismissed. Mr Fentem appealed to the EAT which, having considered another EAT decision with similar facts, dismissed his appeal.
The EAT agreed with the tribunal that where the employee has given notice of resignation, and the employer invokes a clause of the contract which specifically permits it to cause the employment to end on an earlier date by making a prescribed payment (for the balance of the notice period) which the employee’s resignation has set in train, that combination of factual circumstances means, in law, that the employer’s conduct only alters the date on which the prior resignation takes effect. It does not mean the employee has been dismissed.
What does this mean for employers?
An employer who wishes to make a payment in lieu of salary to an employee who has resigned must be permitted to do so by the employee’s contract of employment. If this is allowed by the contract of employment, employers can cut short the notice period of an employee who has resigned without this being deemed to change the operative reason for the termination of employment from a resignation to a dismissal. However, if the contract does not allow for this, where an employee resigns on notice and the employer unilaterally cuts short the notice period, this will amount to a dismissal.
