If your employee resigns, does paying them a contractual PILON amount to dismissing them?

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‘No’ was the conclusion arrived at by the Employment Appeal Tribunal in Fentem v Outform EMEA Ltd.

Mr Fentem’s terms of employment stated that both he and his employer would need to give nine months’ notice to end his employment. His contract also provided that if Mr Fentem was to serve notice, his employer could end his employment immediately by making a payment in lieu of “the salary (excluding bonuses) to which he would have been entitled during the notice period or any part of it”.

Mr Fentem’s employment transferred on these terms to Outform EMEA Limited from January 2019. Mr Fentem concluded that “the new arrangement was not necessarily something I desired” and gave nine months’ notice in April 2019. Accordingly, his employment was due to end in January 2020.

In December 2019, Mr Fentem was called into a meeting with his line manager Mr Joyce, Outform’s Chief Operating Officer. Mr Joyce said that Outform would be “exercising its discretion to pay him in lieu of the remainder of his notice period, bringing his employment to an immediate end”.

Mr Fentem was paid salary in lieu of the remainder of his notice period.

Mr Fentem claimed that he was unfairly dismissed, so the Employment Tribunal needed to decide if he had actually been dismissed by Outform in December 2019.

The Tribunal found that Mr Fentem was not dismissed. Instead, he resigned on notice, and the date his employment would end was brought forward in accordance with his contract. Since Mr Fentem was not dismissed, the Tribunal rejected his unfair dismissal claim.

Mr Fentem appealed, and his case reached the EAT.

The EAT analysed the relevant legislation, and confirmed that the statute clearly provides that “in any and every case in which the contract of employment is terminated by the employer, there is a dismissal”. However, the EAT concluded that it was bound to follow case law which “points to the conclusion that there was no dismissal in the present case, because it is one in which, following a resignation, the employer invoked a contractual clause enabling it to cause the employment to terminate on an earlier date”.

So, cutting an employee’s notice short by paying them in lieu of notice in accordance with their employment contract, in circumstances where they have already resigned, does not amount to dismissal by the employer.