Employment e-Brief – Premature notice of termination

If an employer sends a notice of termination to an employee prematurely and/or by mistake, can they unilaterally withdraw that notice? In the recent case of CF Capital v Willoughby, the Court of Appeal recently ruled that they could not.

The Respondent was struggling financially, and had discussed a number of potential redundancies. As an alternative to redundancy, the Claimant was offered re-engagement on a self-employed basis.

Though talks were continuing between the parties, and the Claimant had expressed an interest, a formal self-employment arrangement was not agreed. However, on 22 December 2008, the Respondent sent the Claimant a letter informing her that her employment would terminate on 31 December 2008, and that the alternative agreement, of self-employment, would commence with effect from 1 January 2009.

The Claimant responded on 5 January 2009 informing the Respondent that she did not accept the alternative agreement, and that their letter had terminated her employment. The Respondent, noting its mistake, contacted the Claimant immediately and stated that if she did not wish to accept the alternative agreement then she could continue in her previous position. However, the Claimant failed to return to work, and the Respondent concluded that she had chosen to resign.

In the first instance, the Employment Tribunal ruled that the “special circumstances” rule applied, whereby the Respondent had made a genuine error, and had withdrawn the dismissal immediately upon realising its mistake.

On appeal, the Employment Appeal Tribunal (“EAT”) overturned this decision. The EAT ruled that employers and employees are generally entitled to take a letter or words of dismissal or resignation at face value. The Respondent appealed against the decision.

The Court of Appeal ruled that once such notice had been given, it could not be withdrawn except by consent from the recipient. The “special circumstances” rule only applied in limited circumstances, the classic example being when purported notice had been given orally in the heat of the moment by words that might quickly be regretted. Accordingly, in these circumstances, the recipient should allow for a “cooling off” period before acting upon the notice. This exception did not apply on the facts of this case, as it appeared that there was a mistaken expectation that the Claimant would accept the proposed self-employment terms, rather than that the Respondent never intended to give the notice in the first place. Furthermore, the notice was clear and unambiguous, and the Claimant could not unilaterally withdraw it.

Once a written notice of termination has been communicated, it is likely to be construed by an Employment Tribunal as an effective dismissal, regardless of whether or not it is made in error and immediately withdrawn. However, notice given during heat of the moment exchanges could be subject to the “special circumstances” exception, and can potentially be unilaterally retracted during a “cooling off” period.

For further information on this case, or for advice on any other employment issue, please contact a member of the employment team.