Société Générale, London
Branch v Geys [2011] EWCA Civ 307
The Court of Appeal determined, in accordance with the general
principles of the law of contract, that the employee's contract
had terminated immediately when the PILON payment was made. The
PILON clause expressly provided that all that was required to
effect termination was the making of the payment and that, once
made, the payment terminated the contract with immediate effect.
There was no need for the employer to notify the employee that the
payment had been or would be made.
The Court of Appeal commented that the date of termination of a
contract at common law, and the 'effective date of
termination' (EDT) that applies to unfair dismissal claims, are
not necessarily the same. Whilst the EDT requires employees to have
knowledge that they have been dismissed, at common law the parties
are (subject to the use of clear and unambiguous words) free to
agree the mechanics of how the employment contract is to be
terminated, which could include doing away with the requirement to
give notice altogether.
Implications
This case highlights the importance of ensuring that PILON clauses in employment contracts are drafted carefully and clearly. The case usefully illustrates the distinction between the method for calculating the "EDT" for the purposes of statutory employment claims (where knowledge of dismissal on the part of the employee is required), and the rules which apply at common law to determine when a contract of employment has terminated (where such knowledge may not be required).
Background
The employee in this case was a managing director of the employer bank and, at the time the PILON payment was made, he had no knowledge of having received it. There was a substantial difference in what he was due, in terms of pay and bonuses, depending on the date of termination of his contract. The result in this case was that the employee received a significantly less generous termination payment, (approximately €2.5 million less), than he would have been entitled to had the contract been terminated 2 weeks later.
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