The case of Meaker v Cyxtera Technology UK Limited serves as an important reminder to employers of the importance of ensuring that letters of dismissal are appropriately clear and unambiguous. The employer in this case wanted to rely on a letter it had sent to an employee referring to a termination date but which was marked "without prejudice" and enclosed a settlement agreement. The employee argued it could not be effective as a termination notice since he rejected the settlement offer.

The employee in the case was employed in a manual labour role. He suffered back injuries in 2018, resulting in an extended absence. In 2019, it was agreed that his injuries would likely permanently limit his ability to carry out his role and an application was made for income protection payments, but this was unsuccessful. On 7 January 2020, the employer first raised the possibility of dismissing the employee and asked him to sign a settlement agreement. Then, on 5 February 2020, the employer sent the employee a letter:

  • headed "without prejudice", but did not include the words "subject to contract";
  • stating that the employee's employment would terminate by "mutual agreement" by reason of capability, and that his last day would be 7 February 2020. It said he would receive payment in lieu of ten weeks' notice ("PILON") and payment for untaken holiday. Despite the reference to mutual agreement, no agreement had been reached; and
  • enclosing a settlement agreement offering a severance payment in addition to the PILON, if the employee entered into the agreement.

The employee rejected the settlement offer in writing on 7 February 2020. On 14 February 2020, the employer paid the PILON and untaken holiday pay into the employee's bank account.

The employer maintained that the letter terminated the employee's employment with effect from 7 February 2020 – which was important because, if that was right, then the unfair dismissal claim which the employee subsequently submitted would be out of time. The employee argued that the letter was merely a without prejudice offer of settlement, which he rejected, and so it could not have terminated his employment.

The court agreed that an employer would normally convey open and without prejudice communications in separate documents, but here they said that the dismissal wording and settlement agreement offer could be read as separate parts of the same document. Moreover, and although this point was more finely balanced, the reference to termination by "mutual agreement" did not invalidate the effect of the letter. The court said that the letter itself was clear on the intended termination date and, if there had been any doubt, the subsequent actions of the employer (paying the PILON and accrued holiday pay) should have removed it. Some may find this a surprising conclusion, and it was clearly a finely balanced one. The message for employers remains that it is far better to separate without prejudice offers of settlement from any intended open termination notice. It will also be helpful to include "subject to contract" wording, in addition to "'without prejudice", when issuing a draft settlement agreement, to avoid the risk of an employee thinking they have been terminated sooner than is intended.

Originally Published by 15 March 2023

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