There is a lot of confusion about notice periods. Hopefully this article will deal with some of the more common questions and issues.
Every employment contract has a provision dealing with the notice required to terminate a contract. This will either be what the contract states or the minimum statutory period set out in s. 86 of the Employment rights Act 1996 (“the Act”).
The minimum statutory notice periods are as follows:
Up to one months employment – no notice
From one month to two years service – one weeks notice
Two years service and over – one week for each completed year of employment up to a maximum of 12 weeks.
These statutory provisions override anything in the contract i.e if an employee has worked for an employer for eight calendar years and the written contract of employment says that the period of notice is one month the statutory minimum is eight weeks and this will be the actual period of notice. Conversely if an employee has worked for an employer for 4 years and the contractual notice period is one month it is the contractual notice which will prevail because one month under the contract is longer (slightly) then the four weeks statutory minimum.
If there is no written contract then it is almost always the statutory minimum which applies.
Many modern contracts contain an alternative for the employer. It can either give notice in the usual way under the contract or dismiss immediately and make a payment in lieu of notice. What this means is that the employer will not be in breach of contract if it dismisses an employee with immediate effect and makes payment of all the money the employee would have earned during the notice period. The payment in lieu of notice should also cover any benefits or the loss of those benefits in monetary terms, loss of commission and bonuses. Sometimes this is just restricted to basic pay and explicitly not any commissions or bonus. If that is the contract the employee has signed up to the employer is likely to get away with this.
Even if such a provision legally correct under the contract if the dismissal is unfair within the meaning of s.98 of the Act and the employee brings a claim any loss of benefits etc can be claimed as part of a compensatory award.
It is common, whether or not there is a payment in lieu of notice clause in the contract, for an employer to want an employee to leave straight away if an employee resigns. There are three main reasons for this. An employee in a notice period is not committed to the future of the employer and may not give of their best, popularly known as “demob happy”. Some employers are afraid about the effect on morale if the reason for the resignation was an element of disaffection and this is communicated to other employees. The third reason is a fear of a loss of confidential information especially if the departing employee is going to a competitor. For the employee they get the bonus of a free paid for holiday.
The converse sometimes occurs i.e an employee wants to leave early but the employer is against this. We don’t have slave or forced labour in this country so there is nothing to stop an employee leaving though they won’t get paid for the balance of the notice period , of course. Technically this is a breach of contract and the employee could be sued. The problem the employer has is trying to quantify any loss and damage. You can’t sue someone for making life a bit awkward or making you have to run around a bit faster. You have to show an actual financial loss e.g you had to employ.someone on a higher salary to cover the work being done by the departing employee it is rarely worth enough money to actually pursue Court proceedings and I have only known of one case in my career. It settled for not a lot of money and the employee did not go back to work.
The principal reason for an employer to have a payment in lieu of notice is that it makes any dismissal without notice within the ambit of the contract i.e. the employer will not be in breach of contract. What this means is that the employer can enforce restrictive covenants in the contract. Clauses which prevent the employee from poaching customers, competing and poaching other employees. If the employer is in breach of contract they can’t do that. It only affects certain employees for whom restrictions are important but in the right case they are extremely effective.
The final issue which often causes problems during a notice period is taking holidays. The usual rule is that employees are entitled to a certain amount of holiday days per year and are entitled to be paid any accrued due but outstanding holiday when they leave. Employees request holiday days and the employer has a discretion to allow them or not allow them depending upon business needs. Generally this seems to work well with only a few grumbles and even fewer cases. Many employers now have a provision in their contracts of employment insisting that an employee takes any outstanding holiday during a period of notice. From en employer’s perspective they will save paying accrued holiday pay and force the employee to take holiday during a time when the perception is that they will not be giving of their best to the employer. Perceptions can be wrong, of course!
This runs counter to the usual position when it is the employee who requests the holiday and the employer exercises a discretion. It is not within the scope of this article to discuss this point further but I am not aware of any Tribunal case which has dealt with the lawfulness of this and even though it is in the contract I do not believe it is lawful for an employer to force an employee to take holiday. If it’s not lawful you don’t have to do it.
Please get in touch for expert advice on your settlement agreement.