REWARD
and controlling employee behaviour. Reviewing the guidance given to managers conducting formal hearings may be necessary, especially where it refers to the companion and who the employee may bring along. “What this case shouldn’t do is deter employers from holding formal meetings with employees, as they’re a necessary and often valuable means of managing and controlling employee behaviour” ‘Pretend’ resignation doesn’t count towards service break In the case of Wade v Jansen UK Ltd, the ET confirmed that continuity of service cannot be broken by sham resignation; instead, it must be a genuine and clean break for service to end. Here, a sales manager was told he was to be dismissed because he had worked for the company for one year and 11 months and the employer didn’t want him to acquire employment rights. In a further discussion, it was agreed the employee would ‘pretend to resign’, then be reinstated after a month. This went ahead as planned. The next year, the employee was given a sales target and was on track to achieve this, with managers calling him the ‘hardest working employee.’ During this time, he also highlighted that he was due a £3,000 bonus, as outlined in his employment contract. But this was disputed by his employer, who said he hadn’t earned it due to poor performance. One month later, in February 2022, the employee was dismissed without warning or due process for ‘poor performance’. He challenged this and, initially, didn’t receive a decision, but a couple of days later, the employer offered to set a new sales target during his notice period. If this was reached, he was told his dismissal would be reviewed. In March 2022, the employer offered to extend the notice, but he declined
on the basis there was no guarantee of reinstatement. He instead raised a claim for unfair dismissal. The respondent argued that the claimant didn’t have the necessary two years to do so, and that even if he did, he would have been dismissed anyway had a full procedure been followed. At preliminary hearing, it was found that the claimant did, in fact, have two years’ service, referring to the resignation as a ‘sham’ and holding that it didn’t break the service as the respondent had intended. The ET also upheld the unfair dismissal claim, concluding that the real reason for dismissal was because the claimant insisted on the bonus payment, not because of poor performance. He was awarded £39,192 compensation. While this case didn’t set out any new legal principles, or throw a different light on established law, it’s an important reminder of how continuity of service works. It cannot be broken by a resignation and a return where there’s an agreement to do so, and employers attempting to break service in this way aren’t going to succeed. This also shows the need for employers using the argument that ‘they would have been dismissed anyway’ to be able to provide evidence of this. The respondent tried, and failed, to argue the poor performance would have led to a dismissal had they gone through a proper process, but there was nothing in their evidence that supported this. In fact, the opposite was true. Employers will only be able to succeed with this argument where they can genuinely show there were conduct or capability concerns. Pay in lieu of notice (PILON) following resignation risks unfair dismissal In the case of Fentem v Outform EMEA Ltd, the employee resigned from his role giving nine months’ notice, in line with his contract of employment. One month before his notice period was due to end, the employer informed him they were enforcing the PILON clause in his contact, to bring forward his termination date. He was paid in lieu for the remainder of the unworked notice. In doing so, the employee wasn’t eligible for a bonus under the organisation’s scheme. The employee argued the early termination of his contract amounted to an unfair dismissal by his employer; he raised this claim to the ET.
Under previous case law (Marshall Ltd v Hamblin), it’s widely recognised that an employee’s resignation isn’t a dismissal if an employer exercises their contractual right to utilise a PILON clause. Fentem believed this outcome to be unfair, so asked the Employment Appeal Tribunal (EAT) to reconsider the position. The EAT agreed that the use of PILON in this situation should amount to a dismissal but didn’t have the authority to overturn the initial EAT decision in the Marshall- Hamblin case. For the decision to be overturned, it must be heard by a higher court, such as the Court of Appeal (CoA) or UK Supreme Court. As such, the EAT couldn’t uphold the claim but an appeal to the CoA was permitted. Unfortunately, the case was dismissed in April 2023 with the consent of both parties before the CoA, suggesting it’s been settled. Since it will likely be another year or more before a similar case could reach the same level (CoA), it leaves employers in somewhat of a limbo, as there’s no clear determination on how situations such as this will be regarded by the tribunal system. In the meantime, there are, however, some key takeaways for employers. Firstly, employers can continue to utilise PILON clauses following a (fair) dismissal, assuming there’s a PILON clause in the contract. But using PILON following a resignation poses the potential risk of an unfair dismissal claim. Employers who wish to utilise PILON in resignation situations should make sure they have full agreement from the employee to do so. This is particularly important if bringing forward the termination date has the effect of taking the employee out of scope for any contractual entitlements or benefits, for example, a bonus payment. A safer alternative to PILON during resignations may be to place the employee on garden leave instead. However, there does still need to be the contractual entitlement or employee agreement to enforce this. Other options to consider may include: l enforcing / agreeing annual leave (with correct notice) l placing the individual on some other form of paid leave. With these options, an employee’s length of service continues to accrue as usual, so any related benefits may have to be honoured. n
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| Professional in Payroll, Pensions and Reward |
Issue 91 | June 2023
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