HM Insights

Why employers need to take care when terminating employment

It's an inevitable aspect of employing a workforce: termination of employment. The recruitment cycle is typically easier, more positive and pleasant than the average exit. Exiting employees can arise in a whole variety of circumstances, from the amicable to the very contentious. However, in any of these circumstances, where the length of service is important, ensuring that an employee's employment is properly ended is vital.

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The importance of length of service and notice of termination

Length of service can influence a variety of rights, be it to the length of the notice period itself, bonus arrangements or indeed entitlement to payments on exit. Service can also interact with age, particularly important for pensions issues.

A recent case decided by the Court of Appeal in England has helpfully illustrated a point commonly understood under Scots law also, namely that when an employee does not actually receive notice of termination until a later date than that envisaged in the letter serving notice, that later date is the effective date for working out when notice of termination has been received for the purposes of legislation. Communication is key when it comes to notice being effectively served.

Thus, the employee who heads off abroad on holiday, returns home two weeks later and only then opens the employer's letter giving notice of termination posted weeks earlier, is under effective notice only at that point in time.

That was important to Ms Haywood in the case of Newcastle Upon Tyne NHS Foundation Trust v Haywood who, as a result, ended employment after turning 50 years old and thus hitting the age required in order to access a lucrative pension. Ms Haywood was abroad on holiday when the letter was posted on 20 April 2011, such letter purporting to give 12 weeks' notice of a redundancy dismissal, effective on 15 July 2011.

However, this letter was not opened and read until her return on 27 April 2011. The difference in timing was key because Ms Haywood turned 50 on 20 July 2011. If she was still employed on that date, she would be entitled to an enhanced pension. The Court of Appeal found that the effective notice of termination was given only on 27 April 2011, and therefore, with the 12-week notice period, this took the date of termination to after 20 July 2011. Ms Haywood therefore remained in employment at the date of her 50th birthday, and so was entitled to this enhanced pension.

Termination with immediate effect

Similar principles apply in effecting a termination with immediate effect. Although it may seem a straightforward matter, failing to follow the appropriate contractual provisions or not communicating a termination effectively can end up as costly mistake for an employer.

For example, there are often provisions in a contract, particularly with senior employees, as to how any notice (including notice of termination) is served – email or non-recorded delivery post are often excluded as permissible methods of serving notice. Should an employee realise this, then complex legal disputes can easily develop.

Get in touch

If in any doubt or handling a termination with any risk, it is best to take advice. We can help – please contact one of our employment team to discuss further.