Haywood and the Contract End Date in Employee Dismissals

pexels-photo-273011.jpegLast month the Supreme Court gave its decision in Newcastle Upon Tyne- Hospitals NHS Foundation Trust v Haywood.  The case can be summarised simply as addressing the question when does a persons notice period when dismissed from their employment end if they are not informed of the dismissal verbally. The three main answers to that question are:

  • The notice period begins when a letter (or theoretically) email is sent to the employee (the date of posting option); or
  • The notice period begins when the letter would reasonably be expected to be read (the reasonable date of receipt option); or
  • The notice period begins when the letter is actually read by the employee (the actual date of receipt option).

This is often a real issue. In many dismissal cases, and I think in most cases this is what an employer should do, the employer will call the employee into a meeting an verbally inform them they are being dismissed. In these cases the date of the letter is not an issue as the decision has been clearly communicated. However, this is not always possible. In fact, oftentimes an employer will not give the news face to face to avoid a confrontation and will just send a letter dismissing the employer – it is in these cases that the Haywood decision is relevant.

Before explaining the case itself a brief recap of what a notice period means. When a employment contract is brought to an end notice of the end must be given to the other party. A failure by an employer to give notice when they are under an obligation to do so will amount to a breach of contract and a possible claim of wrongful dismissal. There are only a few situations where an employer can evade giving notice, off the top of my head the only two I can think of is if a contract ends by ‘frustration’ and where an employee is dismissed for gross misconduct.

A person’s contract of employment will state how much notice needs to be given to end the contract. What this means is that the employment will not end until that notice period has expired. Any notice period must meet the notice period in the contract. If the contract is silent on notice period – or if there is no written contract – then the law states that a reasonable notice period must be given. Section 85 of the Employment Rights Act 1996 also sets out in legislation a minimum period of notice that must be given . Therefore, at a minimum (the contract or reasonable period may require more) is not greater a person’s notice period will be :

  • One week if the employee was employed for less than two years;
  • One week for every full year employed up to twelve years employment;
  • Twelve weeks notice if employed for at least twelve years.

What was Haywood about?

The facts of Haywood are unusual because the issue of when the claimant’s contract ended  (i.e., the date her employment ended) were the deciding factor in whether she would receive a much more generous pension benefit that ran into the thousands of pounds. The basic facts of the case were:

  • The employer sent Mrs Haywood a letter dismissing her from employment on 20 April 2011 by recorded delivery.
  • The recorded delivery letter was signed for by Mrs Haywood’s Father on 26 November but it was not read by her until 27 April 2011 when she returned from a vacation.
  • The basic issue to be decided was when the notice period began. If it began on 26 April Mrs Haywood would not qualify for an enhanced pension, but if it began on 28 April 2011 she would benefit from the pension benefits.

Lady Hale giving judgement for the Supreme Court set out that “There is an implied term that written notice runs from the date it is read, or if earlier, the date one had a reasonable opportunity of reading it.” Because 27 April 2011 was the first date that Mrs Haywood had a reasonable opportunity to read the dismissal letter that is the date the notice period began. This means that unless there is an express term allowing to the contrary the notice period will commence when an employee receives and reads the dismissal notice or, if they have not, would reasonably have done so.

If this seems harsh on an employer because it is uncertain when a dismissal takes effect the court highlighted that there is no reason employers could not make an explicit contractual term saying notice began when posted or, preferably, communicate dismissal decisions in person.

What is the significance of the case for union representatives and employees?

From an academic point of view the judgement is interesting. It was a split 3:2 decision which tends to point to interesting debates of law and in this respect it seems to me that the decision of the majority is indicative of an, in my view appropriate distinction between common law contractual principles and the reality of contracts, and attendant power differentials, in a specific employee-employer context.

However, practically speaking the case raises a number of issues that employees should be aware of aside from the exceptional circumstances of the case.

First and foremost, where a dismissal has been communicated by letter it is important to ascertain when a decision was actually received and read and, if there is a gap between the two identify the reason for this. If there is a reasonable reason why there is a delay between when an employee was sent and actually read the letter then the notice period may not begin until a few days or even weeks later.

For example, if an employer sends a letter to an employee dismissing them from employment giving them four weeks notice and it is delivered on a Monday but, in fact on the employee does not read it until the following Monday because they were an in-patient in hospital for that period the employee will have a case for saying their dismissal should not take effect until five weeks after the letter was send. In short, this means that the employer may owe the employee an additional week’s salary. In a situation where money is tight and finding new employment is difficult an extra week’s salary can make a significant difference in the ability to financially cope with a dismissal.

Second, in Haywood it was pension benefits that the ‘additional’ notice period guaranteed. Trade union reps should obviously be alert to this but of more significance is to explore whether any period will secure statutory rights. For example, in most unfair dismissal claims an employee can only pursue a complaint of unfair dismissal if they have been employed by a minimum of two years. It is not unknown for an employer, conscious that an employee is soon to qualify for statutory rights, and takes action to dismiss an employee before these come into effect. If an employee does not receive a decision until after then (even though issued before) then the employee will likely qualify for employment rights after all.

It is worth adding a note of qualification here. The key date in unfair dismissal claims if the ‘effective date of termination’ this is not a contractual term but a statutory one. In an earlier decision the Supreme Court determined in Gisda Cyf (2010)  that an effective date of termination is to be assessed by essentially the same considerations in Haywood which is conceptually helpful as the contractual termination date and statutory effective date of termination should after Haywood be synonymous.

Third, a likely consequence of this judgement is twofold. Either that new employment contracts will more frequently have express terms with regard to service of notice, something unions and employees will need to be alert to when new contracts are agreed. More likely, employers will now more frequently seek to serve a decision upon a person in person at a face to face meeting. This will signal a change of approach from how some employer approach formal meetings; many take the approach that a meeting is convened to hear evidence but not give a decision face to face, this can be a detriment to the employee’s case as, for some managers at least, telling someone face to face that they dismissed, looking into the employee’s ‘white of the eyes’, is more difficult.

Fourth, Lord Briggs in his dissenting judgement commented that

Contracts of employment determinable on notice have been around for hundreds of years, and there must be many millions extant in the common law world at this moment which must be taken to have had such an implied term embedded in them from the moment when they were made. The use of the post to give such notice has been an accepted method for well over a century, even if recent advances in information technology may well mean that it has only a few more years of useful life.

One of the first issues a law student will encounter when being introduced to contract law is the strange rules that have developed around contract negotiations by post. In Adams v Lindsell (1818) B & Ald 681 for example a person accepting a contract by post will have a binding contract from postage immediately, even if the letter is never delivered. By contrast, in Stevenson, Jacques & Co v McLean (1880) 5 QBD 346 a letter revoking a contract is not effective on posting but only on delivery.

Haywood is in some ways an extension of these contract cases but, as Lord Briggs notes, with changing forms of communication even without face to face service of decisions,  “recent advances in information technology may well mean that it has only a few more years of useful life.” The implication being that email, or even instant messaging solutions, may replace post as the main alternative to giving decisions in person. Lord Briggs is no doubt correct and if it does then the question of whether a person ‘reasonably’ does not receive a dismissal notice nearly contemporaneously given the near constant use of smartphones and similar communications devices. But it strikes me as we approach the onset of GDPR in just five days that may raise a range of other issues. If a person has not explicitly consented to electronic communication is such service lawful – whilst I can see that use of personal information would likely satisfy the condition that “processing is necessary for the performance of a contract to which the data subject is party” if there is no explicit consent and especially if the employee has set out a wish not to be contacted except by post then would service, the mode of which may well be unlawful, constitute effective service?

Fourth, so far this post has considered the sole employee being dismissed. However, where an employer is looking to dismiss multiple, and potentially hundreds of employees then Haywood has the potential to cause significant difficulties for employers with the prospect of different dismissal dates for the employees in the same redundancy exercise. It seems to me that here there is a significant impetus to unions, as part of the collective consultation to negotiate generous notice periods that go beyond statutory and contractual minimums so as to mitigate this detriment to the employer and secure benefits for members.

 

 

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