Resignation or dismissal?

The EAT has held that where an employee resigns and the employer brings forward the termination date by making a payment in lieu of notice the employee is not held to have been dismissed.

Fentem v Outform EMEA Ltd

Fentem resigned from his employment with Outform in April 2019, giving the nine months’ notice required by his contract of employment.

In the last month of this notice period (December 2019), Outform exercised the right specified in Fentem’s contract of employment to terminate his contract immediately, by making a payment in lieu of the remainder of his notice period.

Fentem brought a claim to the ET for unfair dismissal.  It is unclear from the judgment why Fentem took this course of action.  However, the actions of Outform were not expected by Fentem and this may have played a part in his decision to raise a claim against Outform.

The first point the ET had to determine was whether or not Fentem had actually been “dismissed” in law so as to allow him to claim unfair dismissal, or whether his employment had terminated by virtue of his resignation (which Fentem had not claimed as a “constructive dismissal”).

The ET held that Fentem had not been dismissed and that the reason for his employment terminating was his resignation.  In reaching this decision, the ET relied on previous case law on a similar matter to the effect that when the only change was to the termination date in such circumstances, there was no dismissal.  Fentem’s claim failed.

Fentem appealed to the EAT, who agreed with the ET and dismissed the appeal.

The EAT held that where an employee has given notice of resignation and the employer subsequently invokes a clause permitting it to end the employment earlier by making a payment in lieu of notice, there is no dismissal.  The exit has arisen from the employee’s resignation therefore the effect of invoking the clause is that the date on which the prior resignation takes effect is altered, but it does not change the reason for termination.

This case highlights the importance of ensuring that employment contracts contain provisions giving an employer the ability to make a payment in lieu of notice in situations involving a resigning employee, as had there been no such clause it is likely that a different conclusion could have been reached by the ET and the EAT.  We can assist in revising contracts and effectively introducing amendments to your workforce contracts.

Equally, employers need to be careful.  It is conceivable that difficulties could arise if the decision is taken to exercise the contractual right of making a payment in lieu of notice in circumstances where the employee could complain under different legislation.  If, for example, there was some ulterior and impermissible reason that could form the basis for a complaint of whistleblowing detriment, health & safety detriment or discrimination legislation.  If there are any unusual aspects to the circumstances in question, employers are advised to take advice before exercising any contractual right of this nature.