When does notice to terminate an employment contract take effect?

Background

This latest decision on notice of termination follows two previous important Supreme Court rulings - Gisda Cyf v Barratt [2010] IRLR 1073 and Société Générale, London Branch v Geys [2013] IRLR 122.

The Gisda Cyf case dealt with summary termination of employment in the context of an unfair dismissal claim, where the key issue was working out the employee’s effective date of termination (“EDT”). This is a statutory concept, defined in the Employment Rights Act 1996, which is not necessarily the same as the actual end date of the contract. For example, the EDT is artificially extended by the statutory minimum notice period if the employer has failed to give proper notice of termination.  In Gisda Cyf, the Supreme Court rejected the argument that conventional principles of contract law should be used to interpret the EDT. It held that notice served by letter was only effective when the employee had a reasonable opportunity to find out about the dismissal. In essence, the employee must be notified that notice to terminate has been given.

The more recent Geys case again dealt with summary termination of employment, in relation to the operation of a pay in lieu of notice (“PILON”) clause. The Supreme Court said that it is an “obviously necessary incident of the employment relationship that the other party is notified in clear and unambiguous terms that the right to bring the contract to an end is being exercised, and how and when it is intended to operate”. Accordingly the Court ruled that, in the absence of an express contractual term, there is an implied term in employment contracts that:

• notice can be given by both employer and employee orally or in writing
• if given in writing, notice may be sent by post
• if given by post, it has to be received and communicated to the employee to be effective.

The general impact of Gisda Cyf and Geys has been to counsel against relying on evidence of delivery of notice to terminate to prove that it has been effectively given. The focus instead has been on the communication of the notice of termination, with the notice only becoming effective when the employee has been told about it, either in person or by reading it in a letter or an email.

The decisions in Gisda Cyf and Geys were both considered by the Court of Appeal in the latest case, which concerned a different factual scenario in which there was no summary termination of employment.

Facts of the case

Ms Haywood’s role transferred to Newcastle upon Tyne NHS Foundation Trust (“the Trust”) from Newcastle Primary NHS Trust following a merger on 1 April 2011. Shortly afterwards she was put at risk of redundancy and had a consultation meeting with the Trust on 13 April 2011. She told the Trust that she was entitled to an NHS pension of around £200,000 if she was made redundant after 20 July 2011 (her 50th birthday) and that she would shortly be going on holiday to Egypt, returning on 26 April 2011. Under Ms Haywood’s contract of employment, the Trust had to give her 12 weeks’ notice to terminate her employment.

On 20 April 2011, the Trust wrote to Ms Haywood, giving notice to terminate her employment by reason of redundancy. It did so by sending her three copies of the same letter - two of them to her home address (one Royal Mail registered and the other by regular post) and the third to her husband’s email address.

Ms Haywood was on holiday when the letter sent by registered post arrived and Royal Mail left a note to indicate it could not be delivered. Ms Haywood’s father-in-law, who was checking her house while she was away, picked up the note and collected the letter from the sorting office on 26 April. He left the letter at Ms Haywood’s home on that day. After delays and re-routing of her flight home from Egypt, she returned home at around 1am on 27 April and did not read the letter until around 8.30am that day. The letter sent to Ms Haywood’s husband’s email address was not seen by him until 10.14am on the same day.

High Court decision

The High Court had to determine whether effective notice had been given to terminate Ms Haywood’s employment on or before 26 April 2011, which was the last day that notice could be served for the termination to take effect before Ms Haywood’s 50th birthday. The judge held that the notice only became effective when it had been received and read by Ms Haywood on her return from holiday on 27 April 2011. She had therefore been employed by the Trust up to and including 20 July 2011 and the Trust was ordered to ensure payment of the higher pension to which she was entitled.

Court of Appeal decision

The Court of Appeal dismissed the Trust’s appeal by a majority (with one of the three judges dissenting). However, the two judges in the majority reached the same decision by different routes

All the judges agreed that notice had not been effectively served by sending a copy of the letter to the husband’s email address. Although Ms Haywood had sent the Trust one email from that address, she had not given authority for it to be used to communicate with her. In any event, she had supplied a postal address for communication (to which the other copies of the letter were posted).

With regard to the construction of the notice clause in Ms Haywood’s employment contract, the Court of Appeal disagreed with the High Court’s approach. It said there was no express term in the contract requiring notice to be received and read by the employee to be effective, and the general rules of contract law should be applied. It was necessary to imply a term into the contract to provide that notice could be given orally or in writing, but the Court said it could not imply a term providing that notice would be effective on a particular date - not least because, if given by post, there were a number of possibilities.

All the judges agreed that the facts in Geys meant that it was not directly applicable to Ms Haywood’s case. One of the majority judges, Mrs Justice Proudman, believed that Geys set down a general principle, given the “special relationship” between employer and employee and the need for certainty when notice to terminate is given, that notice has to be actually communicated to be effective.

The other majority judge, Lady Justice Arden, disagreed, saying that Geys was not authority for such an implied requirement for “communication” of notice and, in the absence of an express contractual provision, the following general principles should be applied:

• An employment contract contains an implied term that notice can be given orally or in writing and, if given in writing, it may be sent by post.
• If sent by post, it has to be received to be effective.
• However, receipt can occur even if the recipient never reads the communication or destroys it.

Crucially, Arden LJ went on to say that when a letter has been sent by post, and it can be proved that it was delivered to the recipient’s last known address, it will be presumed that the letter was received by the person to whom it was addressed unless the contrary can be shown. This means there is a rebuttable presumption: once the employer has proved delivery of the letter, the burden shifts to the recipient to show they did not in fact receive it.

In Ms Haywood’s case the majority concluded that Ms Haywood had proved that, even if the letter was delivered to her home by her father-in-law on 26 April 2011, she did not herself receive it until she returned home from her holiday on 27 April. It followed that 12 weeks’ notice running from that date expired on 20 July 2011, which was Ms Haywood’s 50^th birthday. Having been employed by the Trust on that date, she was entitled to the higher pension.

The dissenting judge, Lord Justice Lewinson, said that the line of authority on service of notice in both an employment context and in other areas such as landlord and tenant was clear that it was effective on delivery. His view was that Ms Haywood’s father-in-law had acted as her agent in collecting the registered letter from the sorting office and leaving it at her house on 26 April, so effective delivery took place on that date.

Implications

This was a case about money. Ms Haywood did not appear to be concerned about the fairness or otherwise of her dismissal, having withdrawn an earlier employment tribunal claim alleging unfair dismissal. (Interestingly, in that context, she alleged her employment ended on 15 July 2011, before her 50^th birthday.) Ms Haywood’s civil claim was focused entirely on unlocking a higher level of pension by virtue of a curious chain of events which led to her receiving written notice to terminate her employment later than her employer had intended.

The Trust clearly did itself no favours. It could have simply given notice orally and confirmed it in writing, in which case notice would have run from the date Ms Haywood was informed. Alternatively the Trust could have delivered the letter personally. This would have been tricky as Ms Haywood was on holiday at the relevant time, but again the Trust could have avoided the problem by not leaving it until so late in the day to give notice.

In reality, it is unlikely many cases of this type will come before the courts as it is relatively rare for so much to ride on the timing of contractual notice. The main takeaway is that, if there is an important reason why notice has to be served under an employment contract on or by a particular date, it should ideally be given personally. That may be orally or in writing (subject to whatever the express terms of the contract may say on the matter). Where personal service is not possible, the employer should take great care to ensure it can produce evidence to prove receipt of the notice by the intended recipient.

Newcastle upon Tyne NHS Foundation Trust v Haywood [2017] EWCA Civ 153 – judgment available here