Contractual notice only starts when the employee knows they are being dismissed
Supreme Court rules that written notice of dismissal is only valid once read
When does notice of dismissal start? Is it when a letter is expected to be received, when it is signed for, or only when the employee themselves reads the letter and finds out that they are being dismissed? In the important Supreme Court Judgment of Newcastle upon Tyne Hospitals NHS Foundation Trust v Haywood it has been held that there is a term implied in all employment contracts that written notice only applies when it is read (if the contract does not spell out something different).
Mrs Haywood held a senior role with the NHS Trust. She was at risk of redundancy and had attended consultation meetings. Between the 19 and 26 April she was on holiday in Egypt on pre-booked annual leave. In her absence, the Trust decided to give her notice of dismissal by reason of redundancy. On 20 April a letter was sent out to her, by recorded delivery. After a card was put through her door on 21 April, her father in law collected the letter on 26 April and left it at her home. She read it the following morning (27 April) on her return from holiday.
The date when notice started to run was very important because Mrs Haywood was approaching her 50th birthday and if the end of the notice period was after her 50th birthday she was entitled to a substantially enhanced pension (this is a case about a 2011 dismissal when 50 was the earliest age to receive a pension on redundancy). For dismissal to take effect before her birthday she had to have received effective notice of dismissal by no later than 26 April.
The Supreme Court’s Judgment is about when notice takes effect if the contract does not spell that out. It was agreed by the parties that a term is implied into the contract, it is just the parties differed about what that should be. The Trust argued that notice should be given when the letter was delivered to the employee’s address.
They relied upon a long line of historic cases and the term which they said had always been implied into ordinary commercial contracts. Mrs Haywood particularly relied upon more recent cases about employment contracts, arguing that the implied term for employment contracts was that written notice can only be served on an employee when the employee has either read the letter, or had a reasonable opportunity to read it.
The Supreme Court has decided that an employee must receive the notice of dismissal for contractual notice to apply. Mrs Haywood was accordingly only given notice on 27 April, when she read the letter, and is entitled to the enhanced pension benefits as she was dismissed at age 50. This decision follows the outcome in the Court of Appeal, but was only held by a 3-2 majority of the Supreme Court Judges, so the outcome was relatively close.
An element of the argument was about whether the result provided sufficient certainty for those involved, as an employer may not know when a letter giving notice will be read (and it might mean that if a group of employees are written to on the same day, their notice/dismissal occurs on different days depending upon when they actually receive the letter). However the lead Judgment concludes that the existing cases have not caused significant difficulty for employers and indeed employers will know when an employee is going on leave so they can make arrangements to ensure that employees are notified beforehand if that is important.
What does this mean for me?
It is always clearer and safer wherever possible to give notice and to communicate dismissal face to face, or at least verbally. This is especially important where a small discrepancy in termination date may have huge consequences for your organisation. It is advisable to keep records of the date and time of any such conversation and exactly what was said.
If you have to send a letter, make sure you follow it up with telephone calls and emails (where you can) to try to obtain confirmation that it has been received. Wherever possible check with employees, who are subject to dismissal proceedings or who are part of a redundancy consultation, when they will be away and ensure you know how and when they can be notified of any decision and where written confirmation can be sent.
This Judgment is only important where your employment contracts do not have provisions about how notice can be served. It is about what terms are implied into the contract if it is silent, it does not stop you from including a term in the contact which confirms that notice is taken as served in certain ways, such as on the day after posting or even upon receipt at the employee’s home address. If you would like to review your contracts and what they should say, please do let us know.
It will be unusual for the precise date of notice to have consequences as significant as those in this case, but the costs of continuing to employ any highly paid or senior employee for additional time may make contractual changes worthwhile.
What this decision does is align the date for notice and/or effective dismissal for breach of contract, with the existing test for unfair dismissal purposes (important when deciding length of service or time limits for bringing claims). It means that the golden rule is that an employee has to know that you have dismissed them or given them notice of dismissal, because your notice/dismissal is not effective until they do.
If you are dismissing in writing and by post, the date that notice starts to run can only ever be when the letter is received, not when it is posted. That is why a verbal decision or sending a decision by email to an agreed email address, are preferable from a certainty point of view.
For all sorts of reasons it is important to get the date of termination right. This case makes clear that you cannot assume written notice is received for it to be effective. This can have particular challenges for employees who have become uncontactable, but such circumstances are relatively rare.
It is important to plan dismissals carefully and take into account when people may be away. If a particular date or timescale is very important to dismissal, an astute employee may sensibly plan to be hard to contact – and you will need to take this into account following this Judgment.
If you have any questions about this decision or the terms of your contracts, please speak to your usual Weightmans contact or to Phil Allen, a Partner in the Employment, Pensions and Immigration Team.