Our Knowledge

30.Apr.2018

Costly consequences - what can happen in the absence of clear contractual notice provisions

The Supreme Court has confirmed that in the absence of a contractual provision confirming when notice takes effect, it is to be implied into all contracts of employment that notice of termination of employment given by an employer to its employee will only take effect (and notice will only start to run) once the employee has received written notice of their dismissal and has either read or had a reasonable opportunity to read this.

The consequences of getting this wrong can be significant. In Newcastle upon Tyne Hospital NHS Foundation Trust v Haywood, Mrs Heywood, an NHS Trust employee, was entitled to an enhanced early retirement pension of around £400,000 provided her employment continued beyond her 50th birthday, on 20 July 2011.  The NHS Trust took the decision to dismiss Mrs Heywood by reason of redundancy and sent a letter serving notice of termination on 20 April 2011. As Mrs Heywood had a 12 week notice period, this meant her employment would end on 15 July 2011 – before her 50th birthday. Mrs Heywood was on holiday when the letter was sent and so did not read the notice letter until her return on 27 April. She argued that her notice period did not start running until she had received and read the notice letter on 27 April, meaning her 12 week notice period did not end until after her 50th birthday on 20 July 2011. The NHS Trust maintained that the notice took effect when the letter was posted on 20 April, and that the £400,000 pay out was not due.

In this case, the Supreme Court noted that had the NHS Trust attempted to communicate the termination by telephone during Mrs Heywood’s holiday, and confirmed this would have been sufficient to allow her to consider the termination notice. It was also recognised that Mrs Heywood had told her employer about her holiday, and when she would return. Where an employee deliberately tries to avoid receiving the notice, this would not be considered as reasonable and would therefore not affect the date of notice.

Employers should be aware that this decision will apply to all employees, unless they have clear contractual notice provisions.  

The effective date of termination is particularly relevant where an employer intends to bring an individual’s employment to an end shortly before two years’ service – the point at which an employee gains the right not to be unfairly dismissed. This case is likely to prompt several employers to review and update their contracts.

Employers should ensure that where the date of termination of employment is crucial, all possible steps are taken to communicate this to the employee and ensure that this is done in good time.  This could be by following up by telephone or emailing the notice with read receipts.

If you are considering a review of your contracts of employment or want to discuss any aspect of how best to take account of this decision, please do not hesitate to contact Katie Russell who will be happy to advise.