When a payment in lieu can cause confusion for you
By Tom Custance & Evie Meleagros, partner at Fox Williams LLP
The Court of Appeal’s decision in Societe Generale v. Raphael Geys may be music to the ears of overworked HR (Human Resources) departments, but may have unsatisfactory implications for employees who are faced with summary dismissal.
Mr Geys brought proceedings against his former employer, Societe Generale for various sums owed to him as a result of the termination of his employment. A large part of the argument concerned the date of termination. Mr Geys was successful in his claim before the High Court, and Societe Generale appealed to the Court of Appeal.
The Court of Appeal found that, for an employer to exercise its right under a ‘payment in lieu of notice’ (“PILON”) clause, it merely needs to make payment of the notice monies to the employee. This then has the effect of terminating the employment ‘with immediate effect’.
The Court’s reasoning for reaching this decision is that on a literal reading of the PILON clause, there was nothing in that clause that required notice to be given to the employee that the employer intended to exercise its PILON right, to properly terminate the employment contract.
However, the effect of the decision is that, should an employee be told that he is being summarily dismissed, the onus is on the employee to regularly check his bank account to see if any payment has been received from his employer, calculate whether that could amount to a notice payment and then work out his date of termination accordingly.
If, like Mr Geys, this happened over a holiday period, the employee may not have checked their bank account in weeks. The employee’s employment has therefore been formally terminated without them even knowing it, leaving them not only unemployed, but, unbeknownst to them, without the benefits that they (and possibly their family) enjoyed, such as medical and life insurance.
Not knowing the date of termination can also impact the employee’s right to sue their employer in the Employment Tribunal: an employee only has three months from the date of termination to do so.
So, it is difficult to see how the Court’s decision is not going to create confusion for employees and employers. An employee ought to be entitled to be notified as to:
(a) whether they will be expected to work their notice or whether they will be receiving a PILON and, more importantly,
(b) confirmation of their date of termination. It should not be left to the employee to second guess the employer: what if the parties reach a different answer?
Unless the Court’s decision is overturned, employers should ensure that the wording of any PILON clause is very clear: whether that clarity be that the employee will be notified of the employer’s decision to exercise its PILON right or whether the employment contract will be terminated at the point of payment of the notice monies to the employee.
Either way, to minimise the risk of a fight in the Courts over the date of termination, employers should at least make the position clear to the employee, regardless of the precise contractual wording.
Tom Custance is a partner in the dispute resolution department at Fox Williams LLP and Evie Meleagros is an associate in the same department. Fox Williams acted for Mr Geys in the Court of Appeal case discussed in this article.