Resignations: employee notice
Sarah-Marie Williams and Anousheh Bromfield of Clyde & Co LLP begin a series of articles on resignations with an overview of employees' notice obligations and employers' rights in relation to employee notice Employers may experience an increase in employee resignations in the new year as many employees' thoughts turn to looking for a new job, particularly where bonuses that are dependent on being in post have been paid. Employees who resign are required to give notice, but employers are also subject to obligations in relation to employees' notice of resignation.
Employees' notice obligations
Employees who wish to resign from their job are required, in the majority of cases, to give their employer a period of notice. The employer can use the notice period to arrange for the departing employee's work to be reallocated and find a replacement. Notice rights and obligations between employers and employees are determined primarily by the terms agreed in the employment contract, subject to the statutory minimum notice requirements set out in s.86 of the Employment Rights Act 1996. Under s.1 of the Act, the written statement of terms and conditions of employment must include details of the length of notice to be given by the employer and employee.
The contractual terms may require either party to give notice that is longer than the statutory minimum (and they may require the parties to give notice in writing). The longer of statutory or contractual notice will apply. Under s.86(2) of the 1996 Act, after one month's continuous employment, employees must give not less than one week's notice to terminate their contract. Therefore, employers are normally entitled to receive at least one week's notice from their employees, or more if the contract says so. (See Notice periods in the XpertHR employment law manual for details of statutory notice periods required to be given by an employer to an employee.)
In practice, employees' contractual notice obligations often reflect employers' obligations. However, it is not a legal requirement for employers' and employees' notice to be the same and employers can require employees to give longer notice than they are entitled to receive. If statutory notice applies the employer's notice may be longer (depending on the employee's length of service).
If the employment contract remains silent on the notice period a "reasonable" notice period will be implied, which must be no less than the statutory minimum. In the event of a dispute the court will determine the amount of notice that is reasonable by considering various factors such as length of continuous employment, customary market/industry practice, and the position and seniority of the employee.
Employees' rights during notice
During the notice period, whether contractual or statutory, and whether served by the employee or employer, both parties remain bound by the terms of the employment contract. Therefore, if an employee resigns, he or she is entitled to receive, during the notice period, the contractual benefits for which he or she has been eligible during employment (for example salary, sick pay, holiday entitlement and expenses). However, the contract may expressly exclude the employee from entitlement to certain benefits if he or she has given notice of termination (for example bonus payments).
Under ss.87 to 89 of the 1996 Act, where statutory notice is applicable, an employee is entitled to receive full pay during the statutory notice period if he or she is absent from work in circumstances where he or she is:
- able and willing to work but is not provided with work;
- unable to work due to illness or injury;
- absent due to pregnancy or childbirth, or on adoption leave, parental leave or paternity leave; or
- on holiday in accordance with the terms of his or her employment contract.
The right to be paid in full applies only during the statutory notice period and applies whether the employer or employee has given notice. Payments such as statutory sick pay may be used to offset the obligation to pay. However, the right to be paid in full does not apply if the notice that the employer must give (ie its notice obligation under the contract) is at least a week longer than its statutory notice obligation (s.87(4) and Scotts Company (UK) Ltd v Budd [2003] IRLR 145 EAT).
Employers that do not wish employees to work notice
Having been given notice an employer may prefer the employee who is leaving not to work it. The employer may not have enough work for the employee to do, or it may not wish him or her to have access to its clients, records, or sensitive and confidential information. Alternatively, it may feel that the employee is no longer committed to his or her job and will underperform during the notice period, or undermine the morale of the remaining staff.
Employers in this situation have a number of options to consider, namely whether or not to:
- pay the employee in lieu of notice;
- put the employee on garden leave; or
- require the employee to take holiday.
Payment in lieu of notice
Employers may take advantage of a payment in lieu of notice (PILON) clause in the contract of employment. A PILON clause gives the employer a contractual right to pay an employee a lump sum in lieu of notice rather than require the employee to work out his or her notice period. The PILON clause may be for salary only, or for salary and payments in lieu of contractual benefits that the employee would have received had he or she worked the notice period.
If there is no PILON clause in the contract and an employer pays the employee a lump sum in lieu of notice instead of allowing him or her work the notice period, without the employee's agreement, the employer will technically be in breach of contract. This could result in the employer no longer being able to rely on contractual rights such as post-termination restrictive covenants.
Garden leave
Contractual garden leave clauses enable employers to require employees to stay at home and not to work during all or part of the notice period. During a garden leave period, the individual remains an employee and continues to receive his or her normal pay and benefits. The contract usually sets out the employee's obligations and any restrictions during the garden leave period (for example a prohibition on contacting clients).
If an employer puts an employee on garden leave when it has no contractual right to do so, or where the employee has not agreed to be put on garden leave, the employer will be in breach of contract. Again, it is unlikely to be able to rely on contractual rights such as restrictive covenants.
Under the Working Time Regulations 1998 (SI 1998/1833), in the absence of any arrangement to the contrary, an employer can require an employee to take holiday by giving notice equivalent to twice the length of holiday that it wishes the employee to take. Therefore, provided that the notice period is sufficiently long, the employer may be able to serve notice on an employee to take holiday for some of the notice period.
Withdrawal of notice
Sometimes an employee wants to withdraw a resignation because of a change of mind, or because a job offer from a new employer has been withdrawn. The employer may be happy for the employee to stay. However, it is not obliged to accept the withdrawal if it does not want to do so. Once a resignation (or dismissal) has been communicated to the other party it cannot be unilaterally withdrawn (Riordan v War Office [1959] 3 All ER 552 HC). However, the Employment Appeal Tribunal has indicated that an employer should be able to withdraw a dismissal if this is done almost immediately and the dismissal was "in the heat of the moment" (Martin v Yeoman Aggregates Ltd [1983] IRLR 49 EAT). If this thinking is followed for resignations, an employee should be able to withdraw a resignation provided that he or she does so as soon as possible, particularly if the resignation was in the heat of the moment. Nevertheless, the general rule remains that unilateral withdrawal of notice is ineffective.
Employees who do not want to work notice
An employee may not want to work his or her notice. He or she may want to start a new job immediately, or may be particularly unhappy or unmotivated at work. It is worth the employer considering whether or not to require the employee to give notice. An employee who clearly does not wish to work is likely to be unproductive and may be disruptive but the employer will still have to pay him or her according to the contract. If the employer waives the employee's obligation to give notice (in circumstances where the employee could give and work notice if he or she wished), it will not have to pay him or her.
Breach of notice provisions
If an employee fails to give proper notice of termination he or she will be in breach of contract and the employer could bring a breach of contract claim against him or her. In theory, the employer could claim damages arising from the breach, which could include the additional cost of providing a substitute to do the work during what would have been the employee's notice period. However, in practice, breach of contract claims are rarely pursued by employers.
Next week's topic of the week article will look at ways that employers can protect their business, following an employee's resignation.
Sarah-Marie Williams (Sarah-Marie.Williams@clydeco.com) is a solicitor, and Anousheh Bromfield (Anousheh.Bromfield@clydeco.com) a trainee solicitor, at Clyde & Co LLP.
Further information on Clyde & Co LLP can be accessed at www.clydeco.com.
