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Baroness-Hale_1493381c At the Supreme Court Lady Hale has reminded employers using the payment in lieu of notice clauses to terminate the contract of employment (so called PILON clause) that they must give notification to the employee (in clear and unambiguous terms), advising that that the payment has been made AND that it is made in the exercise of the contractual right to terminate the employment with immediate effect.

This is perhaps the minor housekeeping point contained in a judgement handed down in Societe Generale, London Branch v Geys (Dec 2012) which deals with a dispute over the failure to do so meaning that the date of the termination was to be determined by the other party (i.e. the employee)!

Basic facts

The appellant, Raphael Geys, is a Belgian national was in dispute with his former employer, Société Générale, London Branch (“the Bank”), about the amount due to him following his summary dismissal from his employment.

Mr Geys employer (the Bank) argued that his entitlement was to a termination payment of no more than €7m, as he was dismissed on 29 November 2007 or at the latest 18 December 2007 (according to the automatic theory and determined by reference to the termination letters).  It also maintains that, having regard among other things to the terms of his employment contract, it is not open to the appellant to claim damages.

His case was that the dismissal occured on 6 January 2008 (the elective theory, being the date he knew of the payment into his account) and that he was entitled to a sum contractually due to him in the form of a termination payment amounting to more than €12.5m and to damages for breach of contract.

The important bits

The court looked at the wording of the contractural clause and conflicts with other documents.  The court said that ‘in order to be effective, termination clauses are to be clearly expressed (in so far as they say what is meant).’  In this case, at the very least for the appellant, the wording that was chosen was ambiguous and in such a situation the ordinary principle must be applied. Any doubt that the wording gives rise to must be construed in favour of the appellant.

At it’s simplest, this case makes clear that an employee should not be required to check his bank account regularly in order to discover whether he is still employed. If he does learn of a payment, “he should not be left to guess what it is for and what it is meant to do.”

The court also considered the issues of elective and automatic theories of the termination of the employmentc contract.  They have determined that the elective theory should stand where the employer was in the wrong.  This is a long standing principle that, beofre the law, wrong doers should not proft from their wrongs.

The questions before the court

Four issues were  before the court in this appeal. The first two, which are of general public importance, bear directly on the question as to the date when the appellant’s employment was terminated. The third and fourth are directed solely to the proper construction of provisions in the contract. They can be summarised as follows:

(1) Does a repudiation of a contract of employment by the employer which takes the form of an express and immediate dismissal automatically terminate the contract or (as was held in Gunton v Richmond-upon-Thames London Borough Council [1981] Ch 448 and Boyo v Lambeth London Borough Council [1994] ICR 727) does the normal contractual rule that the repudiation must be accepted by the other party apply equally to that case?

(2) When, in the events that happened and having regard to the terms of the Handbook, was the contract of employment terminated?

(3) Is there any conflict, within the meaning of a within the Contract, between the provision for termination on three months’ notice in another paragraph of the Contract and the provision in the Handbook which gave the Bank the right to terminate the employment at any time with immediate effect by making a payment in lieu of notice?

(4) On a proper construction of the Contract, is the employee entitled to maintain a claim for damages for wrongful dismissal and (specifically)  an alleged breach of the tax efficiency provision in contract OR is he to be taken to have waived those claims?

Citation: [2012] UKSC 63 

On appeal from [2011] EWCA Civ 307