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What is the effective date of termination? (update)

Posted on 2nd June 2009
Case law

In February 2009 we reported on a case. The Court of Appeal has overturned the decision.

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non-payment of salary and communication made it clear employment was terminated

Kirklees Metropolitan Borough Council v Radecki EWCA 2009

Background

The facts of this case are complex and are set out in the February 2009 edition of hrlegalnews along with a summary of the EAT decision. In essence, the employee had been suspended from work for over 12 months whilst negotiations took place. The terms of a proposed compromise agreement were not finalised. Prior to 31 October 2006 the employer told the employee's trade union that it was going to stop paying his wages from this date and this is what happened. Late in February 2007 the employee confirmed to the employer he was not signing the compromise agreement and queried why he was not being paid!

The decision

The Court of Appeal has confirmed that the non-payment of salary and its communication to the employee's union rep made it clear that his employment was being terminated.

It is unclear from the Court's decision if the important aspect of this case was the communication to the union that the employer was about to stop paying the employee. Would there have been a dismissal if the employer had not told the employee of its intention to stop paying him? Was this not a case of simply a wrongful deduction of wages or a case where the non payment of wages could have been adopted by the employee as a fundamental breach of contract entitling him to resign and to claim constructive unfair dismissal? The decision is vague why the non-payment of salary could effectively terminate the employment relationship. It would have been helpful for the Court to have clarified its reasoning!

In practice

It is possible that this decision could catch the unwary employer out. For example, the terms of a draft compromise agreement include a proposed termination date of 1 August 2009. It provides the employee to be paid up to and including this date. The compromise agreement is not formally completed by this date. Its terms are still being negotiated. If the employer has made it clear to the employee that his or her salary will cease as at 1 August 2009, then it is likely that this date will be treated as the effective date of dismissal, even if the employer did not expressly state it was terminating employment from this date. The employee could then seek to bring an unfair dismissal claim based on a repudiary breach of contract i.e. the non payment of salary.

Additionally, if the employer has not followed a fair dismissal procedure, this may add to the merits of the employee's claim.

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