Contracts - Contractual Termination Date

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In the case of "Geys v Société Générale", the employer handed an employee a letter which stated that his contract was terminated 'with immediate effect'. The High Court ruled, however, that the contract was only effectively terminated some five weeks later.
United Kingdom Employment and HR

Originally published May 2010

In the case of Geys v Société Générale, the employer handed an employee a letter which stated that his contract was terminated 'with immediate effect'. The High Court ruled, however, that the contract was only effectively terminated some five weeks later. This was particularly problematic for the employer as, in the interim period, the employee had become entitled to payment of a year-end bonus.

Contractual documentation seemed to entitle the employer to terminate the contract of employment without notice, provided that it made a payment in lieu of notice (PILON). However, as no payment was actually made until five weeks after the employee was handed the termination letter, the court decided that the effective termination date was the payment date.

Points to Note –

  • The employer's right to terminate and make a PILON was not mentioned in the employee's contract, but only in the Staff Handbook. It was made clear in the Staff Handbook that, where the terms of the two documents conflict, the terms of the contract would prevail. The employee argued that this meant that the employer had no right to terminate and make a PILON because this right was not mentioned in the contract. The court disagreed; the Handbook only qualified the terms of the contract, it did not conflict with them. Employers should check their documentation to ensure that different documents can be read consistently with each other and that they are all up to date.
  • The employer lost the case because it had not made it clear to the employee that it was exercising its right to terminate with immediate effect by making a PILON. In fact, it had failed to make the payment at the appropriate time. Again, employers should check their termination procedures and ensure that they are properly implemented.

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