In Morrish V NTL Group Limited (3rd July 2007) the Inner House of the Scottish Court of Session (equivalent to the English Court of Appeal) has confirmed that there is no implied term in an employment contract to make a payment in lieu of notice (PILON).
Mr Morrish was dismissed without being given the 12 months’ written notice required by his employment contract. He claimed damages for breach of contract. His employer, NTL Group Limited, had offered him a payment of salary in lieu of notice which he rejected as he claimed the damages award would be bigger. NTL argued that there was an implied term giving it the right to terminate his contract by making a payment of a proportion of his salary and emoluments corresponding to the period of notice stipulated in the contract.
The Court of Session concluded that such a term should not be implied as it would be manifestly contradictory to the express notice clause. There was no reason for holding that a term should be implied which would have the effect of depriving the employee of the normal remedy of damages for breach of contract, the purpose of which would be to put him in no worse a financial position than that in which he would have been had the employers fulfilled their contractual obligations to him. As a result, it seems that Mr Morrish will succeed in getting an award of damages which will include the bonus he would have earned in the 12 month notice period and so be much more than the payment in lieu of notice NTL offered him.
This case emphasises the importance of having express PILON clauses in employment contracts if employers want to be able to get out of the contract just by paying, for example, fixed salary in lieu of notice. Such clauses should be carefully drafted to set out a clear formula for what is payable, otherwise they will be useless.
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.
The original publication date for this article was 12/07/2007.
