When negotiations go wrong: when is the last day of employment?
As most readers will be aware, employees with sufficient service (ie twelve months) have three months from their effective date of termination (EDT) in which to bring an unfair dismissal claim. Determining the EDT is usually straightforward. However, given its effect on an employee's right to bring a claim, the EDT can sometimes be a contentious point. This week's update looks at a recent Court of Appeal decision in a case where the EDT was not immediately clear.
What is the usual position?
If a contract is terminated on notice the usual provision is that the EDT will be the date on which notice expires. If no notice is given (or if the employee is paid in lieu of notice) then the EDT is "the date on which termination takes effect".
The Radecki case - negotiations
The case of Kirklees MBC v Robert Radecki is an example of negotiations over a compromise agreement that went wrong.
The facts of the case were as follows:
- - Mr Radecki, a teacher, was suspended by his school on 21 October 2005, shortly after commencing his employment pending a conduct related disciplinary investigation.
- - Following two postponed disciplinary hearings, Mr Radecki entered into negotiations with his employer (the Council) in August 2006 over a compromise agreement. He was represented by his union representative.
- - The negotiations were drawn out. Originally, the compromise agreement envisaged a termination date of 31 August 2006. However, a later draft envisaged a termination date of 31 October 2006 and Mr Radecki's union representative was informed that Mr Radecki would receive his pay to this date.
- - On 16 October 2006, the union representative informed Mr Radecki that she was unable to negotiate further on his behalf and that he either had to accept the agreement and see a solicitor for advice on its terms and effect or to take the risk of claiming unfair dismissal. Some negotiations continued after this date.
- - An email from the Council to the union representative on 1 November 2006 stated that Mr Radecki's employment would be terminated prior to a 7 November payroll deadline. A revised agreement attached to this stated 31 October 2006 as the termination date and Mr Radecki's pay was stopped on 31 October 2006.
- - On 6 November 2006, the union representative wrote to Mr Radecki and explained that his choices were to pursue a claim or accept the agreement. Initially, Mr Radecki did accept the agreement and proceeded to arrange an appointment with the union's solicitors. However, he then complained about the representation by his union and this led to the union withdrawing its support.
Mr Radecki's actions
In late February 2007, Mr Radecki told the Council that he was rejecting the compromise agreement and that he wanted to receive his pay from 31 October 2006 to date. On 5 March 2007, the Council sent him a letter and his P45. The letter referred to 31 October 2006 as the final date for his employment "as agreed with him and his representative" and informed him that he was terminated on the payroll system and his employment had terminated on 31 October 2006. The Council reminded him that his union representative had signed documentation to confirm Mr Radecki would sign the compromise agreement.
The claim
Two days later, Mr Radecki presented an unfair dismissal claim to an employment tribunal. He claimed in evidence in the claim that his employment had not been terminated until 6 March 2007 when he received the Council's letter.
The Employment Judge found that Mr Radecki was aware by at least the middle of November 2006 that his salary had not been paid. Further, the Employment Judge concluded that Mr Radecki's employment had been terminated by mutual consent on 31 October 2006. The Employment Tribunal concluded that Mr Radecki had by his actions held himself out as agreeing to a compromise under which his employment was to terminate on 31 October 2006. Accordingly, the EDT was 31 October 2006 and the claim was out of time.
The EAT
Mr Radecki appealed to the EAT, which took a different approach. The EAT concluded that, since the compromise agreement was subject to contract, the Tribunal's interpretation that the 31 October 2006 had been agreed as the termination date was not viable. The EAT rejected an argument that the Council's actions had evinced a clear intention to terminate the employment from 31 October 2006 and it allowed the appeal. It concluded that there was no sufficiently unequivocal statement representing termination until the Council's letter of 5 March 2007.
The Court of Appeal
The case then made its way to the Court of Appeal, which took a different approach again. The Lords Justice agreed with the EAT that the compromise agreement was subject to contract and that therefore the employment did not terminate by mutual consent on 31 October 2006. This left a submission made by the Council that by stopping Mr Radecki's pay from 1 November 2006 it had terminated his employment by repudiating his contract.
The appeal succeeded. However, the Court of Appeal's judgment is confusing. The Court of Appeal judge who gave the leading judgment decided that the question to be answered was whether the Council had unequivocally evinced an intention to terminate the employment as from 1 November 2006. However, he concluded that this was a question of fact and that the case should be remitted back to an employment tribunal.
The other two Court of Appeal judges did not see a need to remit the case and concluded that the Council's actions in stopping Mr Radecki's pay had been sufficient to bring his employment to an end on 31 October 2006. His claim was therefore out of time. The EDT would be the date of summary dismissal as long as this was known to the employee. The employment was terminated by the stopping of salary and Mr Radecki was aware of this within a couple of weeks.
One further point of confusion is that an employee usually has to accept a repudiatory breach before it is effective. None of the judgments in the Court of Appeal deal with this point. However, it seems that the Court of Appeal concluded that the Council's repudiatory breach of contract by not paying Mr Radecki his salary was sufficient to terminate the contract without this needing to have been accepted by Mr Radecki.
The practical effect
- - This case is a good example of what can happen when negotiations over a compromise agreement go wrong. This can lead to a position where there is no clear statement regarding the date of dismissal.
- - It appears from this case that stopping an employee's salary can, in certain circumstances, be sufficient to constitute summary dismissal and the date on which payment of salary stops can therefore be the EDT.
- - It is unfortunate, however, that the Court of Appeal's judgment is not clearer. The EDT in cases where it is not immediately clear (eg where there is no communication from either party) will normally depend on the actions of the employer and employee and the Employment Tribunal's interpretation of those actions.
- - To be on the safe side, employers should ensure that they communicate the date of dismissal clearly and unequivocally during any compromise agreement negotiations. In any event, employers will want to ensure they follow a fair procedure so they do not inadvertently end up unfairly dismissing an employee without a compromise agreement having been agreed.
Contacts
Christina Tolvas-Vincent
Telephone: +44 (0)845 415 8210
Nikki Duncan
Telephone: +44 (0)845 415 7601
Bettina Rigg
Telephone: +44 (0)845 415 7644
Jon Hales
Telephone: +44 (0)845 415 8223
Simon Richardson
Telephone: +44 (0)845 415 8220
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