UK: Employment Continues Until Employee Receives Notice Of PILON

In Geys v Societe Generale, the Supreme Court has confirmed that an employee's contract of employment continued until the date on which he received unequivocal notice that his employer was terminating his employment by making a pay in lieu of notice (PILON).

Mr Geys was told on 29 November 2007 that his employment would be terminated with immediate effect, and he was then escorted from the building. On 18 December the bank sought to exercise the PILON in his contract by paying three months' notice into his bank account. However, they did not inform Mr Geys that they had done this until 6 January 2008.

The date of dismissal was significant because Mr Geys' termination payment was linked to previous years' bonuses, and would be 4.5 million euros higher if his contract was terminated in 2008 rather than 2007. The bank argued that Mr Geys' contract had been terminated on 29 November 2007, or alternatively on 18 December 2007 when the money had been put into his bank account. Mr Geys argued that his termination date was the expiry of his three month notice period which started on 29 November.

The Supreme Court held that termination under a PILON will only be effective if notice of the PILON has been given in clear and unambiguous terms, stating that the clause has been exercised and when payment is to be made. It should not be left to an employee to check his bank account to find out whether he is still employed. If notice is given before the PILON has been made, the contract terminates on the date of payment. If notice is given after payment has been made, as in this case, the contract terminates when that notice is received. Mr Geys only received a letter on 6 January 2008 confirming that the bank was exercising its right to summarily dismiss him and to make a PILON. Accordingly, this was his termination date.

This case highlights the potential consequences of failing to follow proper procedures when terminating employment. If a contractual PILON is to be made, this must be communicated expressly to an employee at the time of dismissal. It is also vital to ensure that termination letters are consistent with relevant contractual provisions.

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