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How far can an employer go without actually dismissing?

Posted on 16th February 2009
HR practice

Stating an effective date of termination in a draft compromise agreement and removing an employee from the employers payroll were not be enough to dismiss.

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anything agreed in the process of negotiating a compromise agreement could not be relied on

Radecki v Kirklees Metropolitan Borough Council

Background

The claimant, Mr Radecki, was employed by Kirklees Metropolitan Borough Council as a teacher. He was suspended on 21 October 2005 in response to concerns raised about his skills, experience and relationship difficulties with other members of staff. A disciplinary hearing was arranged but then postponed while a compromise agreement was being negotiated. Mr Radecki continued to be paid while on suspension up until the end of October 2006. By this time the compromise agreement had still not been finalised, although a draft had been produced which stated that the termination date would be 31 October 2006. The draft compromise agreement was marked as being 'without prejudice' and 'subject to contract'. Mr Radecki was unhappy with its terms and he informed the Council on 22 February 2007 that he rejected the draft agreement.

In response the Council wrote on 5 March 2007 asserting that it was 'mutually agreed' that his employment ended on 31 October 2006 and observed that he had also been removed from the payroll system on that date. The Council observed that it had been 'led to believe' that Mr Radecki was in agreement with the compromise agreement as drafted. This was partly due to the fact that the Council was aware that he had signed a slip from his trade union saying that he was content with the terms of the draft agreement and permitting the union to send the papers to the union's solicitors so they could advise him on the agreement before signing. Shortly after the Council's letter Mr Radecki received his P45 containing the termination date of 31 October 2006.

On 7 March 2007 Mr Radecki brought a claim against the Council for unfair dismissal. The issue arose of when he had been dismissed, given that the claim had to have been brought within three months of the date of dismissal. The employment tribunal found that Mr Radecki's employment had terminated by mutual consent on 31 October 2006 and that his claim was therefore out of time. Mr Radecki appealed the decision.

The EAT's decision

The EAT held that the effective date of termination was 5 March 2007 and overturned the judgment of the employment tribunal. It maintained that the first 'sufficiently unequivocal statement' terminating employment was the Council's letter of 5 March 2007 and as a consequence this was the date when Mr Radecki was dismissed.

The EAT's decision was based on the reasoning that anything agreed by Mr Radecki in the process of negotiating the compromise agreement was clearly without prejudice and subject to contract, so it could not be relied on against him. The EAT did not consider there to have been a freestanding enforceable agreement, as the draft compromise agreement was in effect conditional on being signed by both parties and by the claimant's legal advisor (following compliance with the legal requirements for the creation of a binding compromise agreement) and essentially it was not the case that both parties had agreed to termination on 31 October 2006. Neither did the EAT accept the Council's argument that Mr Radecki's removal from the payroll amounted to a termination of employment.

The employment tribunal had relied on a case in reaching its decision in which it was held that the effective date of termination is the date when the employee ceases to attend his or her place of employment. The EAT did not consider the facts in this case to justify a decision that there was an unequivocal termination of the employment contract when Mr Radecki ceased to attend his workplace, as the facts were more consistent with him having been suspended.

The EAT established that Mr Radecki's unfair dismissal claim had been lodged in time and could be heard by the employment tribunal.

In practice

This case serves as a warning to employers that the point at which an employee agrees to the idea of entering into a compromise agreement is not the finishing point. Employers need to remember to proceed with caution in their dealings with employees in these circumstances and to clarify any important issues in the employment relationship under open rather than without prejudice correspondence. They should ensure that they review the case regularly and perhaps impose a long-stop deadline after which negotiations for the compromise agreement will cease.

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