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Forms of termination

Updating author: Max Winthrop

Summary

  • The termination of a contract of employment may result in various claims, including a claim for unfair dismissal, breach of contract or discrimination. (See Termination overview)
  • A contract can be unilaterally terminated by way of resignation by the employee or dismissal by the employer. (See Dismissal and Resignation)
  • Many of the statutory rights and liabilities, for example the right not to be unfairly dismissed, are largely dependent on whether or not the termination has taken place by way of a dismissal. (See Dismissal)
  • A resignation can be a "constructive" dismissal if the requirements of s.95(1)(c) of the Employment Rights Act 1996 are met. (See Constructive dismissal/repudiation of contract)
  • A contract can be terminated by mutual agreement between employer and employee. (See Termination by mutual consent)
  • If a contract is entered into for a fixed term or for a specific purpose or until a specific event occurs it will terminate at the end of that term by way of a dismissal of the employee. (See Expiry of a fixed-term contract and Termination by performance)
  • A contract can be frustrated by the happening of an unforeseen and unprovided for event such as severe or prolonged illness, death, war or imprisonment. (See Frustration)
  • The date of termination is relevant for enforcing statutory employment rights. It is important to ascertain the date of termination, not least because the limitation period for bringing a claim will run from that date. (See Date of termination)

Future developments

There are no future developments.

Termination overview

All contracts of employment will at some point come to an end for all employees. There are a surprisingly large number of ways in which this can happen.

Sometimes termination is planned and is under the control of the employer. This might happen where perhaps an employee has been suspended from work during a disciplinary investigation that concludes that the employee must be dismissed.

Sometimes termination is unplanned and is not really under the control of the employer or employee. This sort of situation can occur where the employer goes into liquidation or the employee dies unexpectedly, or perhaps in a situation where tempers are frayed at work one day and the employee storms off saying that he or she is never coming back.

What is the legal position in any of these situations? What rights does the employee have and what duties are owed by the employer?

The law has evolved to deal with these sorts of eventualities and also in recognition of the fact that employment law is, to a large extent, a subset of contract law operating in an environment in which the parties to the contract are not necessarily in an equal bargaining position but will probably work very closely with one another on a daily basis. Contract law has therefore contributed a significant amount to the legal position on termination of employment.

However, given that many employee rights are created by statute, it is to the statute or statutes in question that employment practitioners must also have due regard when considering the implications of the termination of a contract.

These are considerable and range from the right not to be unfairly dismissed in the Employment Rights Act 1996 to the right not to be dismissed in breach of the provisions contained in the Equality Act 2010, which prohibits, inter alia, discrimination because of a protected characteristic, ie age, disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, race, religion or belief, sex or sexual orientation.

Termination of employment is not therefore a subject that can be categorised into a neatly packaged area of law. The termination of a contract of employment may have many ramifications ranging from an employee bringing a claim for breach of contract or perhaps a claim for disability discrimination, to an employer considering whether or not it should provide an employee with a reference or whether or not it can enforce the restrictive covenants in that employee's contract of employment post termination.

The starting point is usually the contract of employment itself. However, it is sometimes the case that the terms of the contract are not certain. The employee may never have been provided with a contract or written statement or, if he or she has, it is likely to have changed in some respect over its lifetime. Disputes can arise in relation to contractual terms.

In any event, as explained above, the employer will also need to consider a number of rights and duties contained in statutes and statutory instruments. These are referred to in the following section, together with an explanation of the various contractual considerations that may be relevant.

Dismissal

The word "dismissal" is central to employment law. It will cover situations that are not commonly described as "dismissals" in popular or colloquial language. For instance, employees who have been made redundant often believe that they have not been dismissed, although in law they have been dismissed for reason of redundancy. Dismissal covers a range of situations including:

A "traditional" dismissal is communicated by the actions of, or words or writing from, the employer to the employee and will be either summary (without notice) or with notice. Notice period requirements are dealt with in Notice and pay in lieu of notice.

When a dismissal is intended and is communicated by way of a written notice of termination there is usually little difficulty in establishing that the employee has been dismissed. If the dismissal notice is sent in the post the notice will be communicated when the employee reads or could reasonably have been expected to read the letter. However, where a dismissal arises out of equivocal words or actions of the employer, particularly where these take place in the heat of the moment, it may not be clear whether or not a dismissal has taken place.

The general rule is that, if a reasonable person would in the particular circumstances perceive the words or actions as amounting to a dismissal, they will constitute a dismissal. If the employee wrongly interprets them as a dismissal then he or she will be taken to have resigned. It is also possible that the words or actions, although not a dismissal as such, were such as to destroy the mutual trust and confidence in the employment relationship and this could therefore convert the "resignation" into a constructive dismissal.

The following examples of harsh language illustrate the difficulty.

"Go, get out, get out" - J & J Stern v Simpson [1983] IRLR 52 EAT.

"You're finished with me" - Tanner v DT Kean [1978] IRLR 110 EAT.

"If you do not like the job, f*** off" - S Futty v Brekkes (D & D) Ltd [1974] IRLR 130 IT.

None of these words were held to amount to dismissals in the particular circumstances.

If unequivocal words of dismissal are spoken in anger an immediate retraction may be enough to counter the dismissal even though the employee wishes to insist that he or she has been dismissed (Martin v Yeomen Aggregates Ltd [1983] IRLR 49 EAT). However, in CF Capital plc v Willoughby [2011] EWCA Civ 1115 CA, the Court of Appeal stated that this is not strictly speaking a true exception to the rule that a notice of dismissal or resignation given orally or in writing should be given its ordinary interpretation, and once such a notice is given, it cannot be withdrawn without consent. The Court of Appeal stated that the "special circumstances" exception is instead "a cautionary reminder to the recipient of the notice that, before accepting or otherwise acting on it, the circumstances in which it is given may require him first to satisfy himself that the giver of the notice did in fact really intend what he had apparently said by it. In other words, he must be satisfied that the giver really did intend to give a notice of resignation or dismissal, as the case may be." In Willoughby, the Court of Appeal held that the employer could not retract clear written words of dismissal that were accepted at face value by the employee, even though the inclusion of the words in the letter was a mistake.

Additional resources on dismissal

Policies and documents

Resignation

An employee may resign at any time by giving proper notice under the contract. Notice period requirements are dealt with in Notice and pay in lieu of notice.

Once a lawful resignation has been given it cannot be withdrawn other than with the employer's express permission or where the resignation came in the heat of the moment and was retracted quickly. Assuming that the employee has given proper notice and does not seek to argue that the resignation is in fact a constructive dismissal, there should be no further problems; the employee cannot claim wrongful or unfair dismissal or a redundancy payment.

There can be difficulties in knowing whether the words or actions of the employee do or do not amount to a resignation. This can cause considerable difficulty for the employer. As a general rule courts will seek to deal with any ambiguity by judging how a reasonable employer, in the particular circumstances, would interpret the actions or words in question.

If an employee purports to resign during a heated outburst using unambiguous words the employer is entitled to take these at their face value, as a resignation (Sothern v Franks Charlesley & Co [1981] IRLR 278 CA). However, the employee is entitled to some leeway and may be allowed to retract within a reasonable time if the words were spoken in anger (Kwik-Fit (GB) Ltd v Lineham [1992] IRLR 156 EAT). An employee's unambiguous resignation will be found not to be effective only in exceptional circumstances (Ali v Birmingham City Council EAT/0313/08).

A letter of notice may not always amount to a resignation if the wording is unclear and ambiguous. (East Kent Hospitals University NHS Foundation Trust v Levy EAT/0232/17).

A resignation under pressure from the employer, eg an invitation to "resign or be dismissed", is likely to amount to a dismissal. However, this should be distinguished from advance warning that a dismissal may occur at some time in the future. The dismissal will not take place until the future event has occurred.

For example, if an employer tells its employees that the factory will be closing down in 11 months' time, and an employee resigns and claims that he or she has been dismissed and claims a redundancy payment, his or her claim will be likely to fail as the advance notification is not enough to constitute a dismissal at that point.

Additional resources on resignation

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"How to" guidance

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Liveflo

Constructive dismissal/repudiation of contract

A resignation by an employee in response to a serious breach or repudiation of the contract by the employer will entitle the employee to argue that he or she has been dismissed for the purposes of bringing a claim both for breach of contract and for unfair dismissal. If the resignation is in response to alleged discrimination the employee may also seek to bring a claim under the relevant statutory provisions.

Section 95(1)(c) of the Employment Rights Act 1996 provides that an employee is dismissed by his or her employer if the employee terminates the contract in circumstances in which he or she is entitled to terminate it without notice by reason of the employer's conduct.

The following are examples of conduct by the employer that have been considered sufficiently serious to constitute a repudiation entitling the employee to resign and claim unfair dismissal:

  • failure to pay wages;
  • harassment (including harassment by other employees);
  • unilateral alteration of the employee's job content or status;
  • humiliating employees in front of others;
  • unwarranted demotion or disciplinary sanctions;
  • falsely accusing an employee of misconduct or incapability;
  • unilateral variation in contract terms, for example a change in hours or pay;
  • requiring a substantial change in location;
  • suspension without pay where the contract does not allow for this, and even with pay if for a prolonged period;
  • failure to notify an employee on maternity leave of a vacancy for which she would have applied had she been aware of it;
  • unfair refusal of a woman's request to work flexibly to meet childcare commitments; and
  • failure to comply with the duty to make reasonable adjustments in relation to a disabled employee.

In Roberts v Governing Body of Whitecross School EAT/0070/12, the Employment Appeal Tribunal (EAT) held that the employer was in fundamental breach of contract when it indicated to an employee on long-term sick leave its settled intention to reduce his sick pay by 50%, which was in breach of a collective agreement.

In Wells v Countrywide Estate Agents EAT/0201/15, the employee claimed constructive unfair dismissal after originally receiving the sanction of dismissal for gross misconduct, which was later, on appeal, substituted by the employer to demotion. The EAT upheld the employment tribunal decision that demotion, in view of the finding of gross misconduct following a reasonable investigation by the employer, did not amount to a fundamental breach of contract. Further, the EAT agreed with the employment tribunal that the original dismissal was fair, and that even if the act of demotion had amounted to a fundamental breach of the employment contract, the constructive dismissal would still be fair. However, some caution is warranted where the employee's acts do not amount to a fundamental breach of contract. In Mostyn v S and P Casuals EAT/0158/17, the employment tribunal found that the claimant resigned because of a breach of the implied term, but it went on to dismiss his claim because it considered the employer had reasonable and probable cause for reducing the employee's pay. The EAT confirmed that the question of whether or not there has been a repudiation does not depend on the reasonableness of the employer. It held that no employer can have a reasonable and probable cause for repudiating the contract where that breach consists of the unilateral imposition of a significant pay cut.

It will always be a question of fact whether or not an employee has resigned in consequence of the employer's repudiatory breach of contract (TSB Bank plc v Harris [2000] IRLR 157 EAT).

In Logan v Celyn House Ltd EAT/0069/12, the employment tribunal found that the principal reason for the employee's resignation was alleged bullying, which it found to be imagined, not the employer's failure to pay contractual sick pay, which the tribunal found to be a repudiatory breach. The tribunal went on to reject the employee's constructive dismissal claim. However, the EAT substituted a finding of constructive dismissal and stated that the tribunal had been wrong to ask itself whether the repudiatory breach of contract in relation to the employer's failure to pay contractual sick pay was the principal reason that the employee had resigned. Referring to Meikle v Nottinghamshire County Council EAT/0033/03, in which the Court of Appeal stated that the employee's resignation "must be in response to the repudiation, but the fact that the employee also objected to the other actions or inactions of the employer, not amounting to a breach of contract, would not vitiate the acceptance of the repudiation", the EAT in Logan stated that the tribunal should have asked whether the repudiatory breach "was a reason for the [employee's] resignation, not whether it was the principal reason".

To succeed in bringing a claim for constructive unfair dismissal arising out of a repudiatory breach by the employer, an employee must satisfy the criteria in Western Excavating (ECC) Ltd v Sharp [1978] IRLR 27 CA. It will not be enough to show that the employer has behaved unreasonably. An employee must show (a) that the employer has committed a fundamental breach of contract or shows an intention no longer to be bound by it; (b) that this was the reason he or she left; (c) that he or she did not act too hastily; and (d) that he or she did not delay too long. In Western Excavating, the employee claimed that the employer had not acted in accordance with good industrial relations and that this was constructive dismissal. While this argument was not accepted by the Court of Appeal, which insisted on breach of an actual term, the subsequent response of the courts and tribunals was to develop the implied term of mutual trust and confidence, which requires each party to act in such a way as to allow the other to have trust and confidence in it. In Chindove v William Morrison Supermarkets EAT/0201/13 & EAT/0043/14, the EAT held that when determining whether or not an employee has accepted an employer's fundamental breach of his or her contract of employment and therefore lost his or her right to resign and claim constructive dismissal, the passage of time between the breach and the employee's subsequent resignation is only one of the factors that must be considered.

In Cockram v Air Products plc [2014] IRLR 672 EAT, the EAT held that, where an employee gives notice to terminate his or her contract of employment in excess of the contractual amount, the employee may be deemed to be offering additional performance of his or her contract, which will affirm the contract and undermine a claim for constructive dismissal.

However, in Novakovic v Tesco Stores Ltd EAT/0315/15, the EAT held that an employee's written acceptance of new terms of employment for a demoted role did not affirm the contract of employment. The employment tribunal had dismissed Ms Novakovic's constructive dismissal claim because it held that she had affirmed the breach by working in the demoted role and had signed and accepted new terms and conditions without protest. Noting that there was unchallenged evidence that the employee had made oral protests throughout the period she worked in the demoted role, the EAT overturned the employment tribunal judgment. It held that the signing of the contract may be powerful evidence of affirmation, but to focus on that exclusively is to consider the issue of affirmation too narrowly.

The existence of the implied term of mutual trust and confidence, which requires that an employer will not "without reasonable and proper cause, conduct itself in a manner calculated or likely to destroy or seriously damage the relationship of confidence and trust between employer and employee", was confirmed by the House of Lords in Malik and another v Bank of Credit and Commerce International SA (in compulsory liquidation) [1997] IRLR 462 HL. An employer cannot rely on an industry norm, such as the "autocratic style of management" in the world of football, to justify what would otherwise amount to a breach of the implied term of trust and confidence (McBride v Falkirk Football & Athletic Club [2012] IRLR 22 EAT). In McBride, the EAT confirmed that "the conduct in question falls to be objectively tested".

In Private Medicine Intermediaries Ltd v Hodkinson and others EAT/0134/15, the employee was absent from work due to work-related depression and anxiety, and the employer was aware that she was "very ill". Following receipt of a letter from the employer, which, among other matters, raised performance concerns, the employee resigned and claimed constructive dismissal. While acknowledging the employer's right to manage the employee, the EAT held that the employment tribunal was entitled to make findings on the manner in which the employer had raised the performance issues, which were found not to be serious or urgent. Upholding the tribunal finding of constructive dismissal, the EAT held that the tribunal was entitled to find that the employer's actions in raising written performance concerns with an employee on sick leave amounted to a breach of contract that caused the employee to resign.

In Tullett Prebon Plc and others v BGC Brokers LP and others [2011] IRLR 420 CA, the Court of Appeal held that the actions of the current employer in attempting to persuade 13 brokers not to honour "forward contracts" to join a direct competitor and to stay with the employer, was a strengthening of the relationship of trust and confidence, rather than an attack on it, given the conspiratorial circumstances in which the employees had been persuaded to sign the contracts by the competitor. Accordingly, the Court of Appeal dismissed the constructive dismissal claims brought by some of the brokers on the basis that the current employer's actions constituted a repudiatory breach of the implied term of mutual trust and confidence entitling them to resign and treat themselves as dismissed. The Court of Appeal also held that the implied term of mutual trust and confidence applied to the forward contracts in which individual brokers had agreed to join BGC Brokers LP at future dates when they were free to do so. In Leeds Dental Team Ltd v Rose [2014] IRLR 8 EAT, the EAT dismissed the appellant's submission that Tullet Prebon Plc had "changed the law and required tribunals in ... constructive dismissal case[s] to make a specific finding as to the employer's intention in acting in the manner said to amount to a breach of the implied term [of mutual trust and confidence]".

In London Borough of Waltham Forest v Omilaju [2005] IRLR 35 CA, the Court of Appeal confirmed that an employee can claim constructive dismissal in response to action taken by the employer that is the "final straw" in a series of acts, even if the final act is not unreasonable when viewed in isolation. In these circumstances the final straw may be relatively insignificant but must not be utterly trivial.

In Kaur v Leeds Teaching Hospitals NHS Trust [2018] IRLR 833 CA, the Court of Appeal held that, in "last straw" cases, an employee may rely on earlier affirmed breaches of contract provided that the later act forms part of the series. The Court of Appeal gave guidance on the correct approach to "last straw" constructive dismissal cases and set out five questions to be applied:

  • What was the most recent act (or omission) on the part of the employer that the employee says caused, or triggered, his or her resignation?
  • Has the employee affirmed the contract since that act?
  • If not, was that act (or omission) by itself a repudiatory (or fundamental) breach of contract?
  • If not, was it nevertheless a part of a course of conduct comprising several acts or omissions which, viewed cumulatively, amounted to a repudiatory breach of the implied term of trust and confidence? (If it was, there is no need for any separate consideration of a possible previous affirmation.)
  • Did the employee resign in response (or partly in response) to that breach?

In Buckland v Bournemouth University Higher Education Corporation [2010] IRLR 445 CA, the Court of Appeal upheld the EAT decision (Bournemouth University Higher Education Corporation v Buckland EAT/0492/08) in which it declined to follow Claridge v Daler Rowney Ltd [2008] IRLR 672 EAT and held that the range of reasonable responses test has no application in determining whether or not an employee has been constructively dismissed. The Court of Appeal held that the test for establishing constructive dismissal is objective. Although reasonableness is a factor that tribunals may take into account in finding a repudiatory breach, it is not a legal requirement. Buckland also established that a repudiatory breach of contract cannot be cured by the employer, so as to prevent the innocent party accepting the breach. In Assamoi v Spirit Pub Company (Services) Ltd (formerly known as Punch Pub Co Ltd) EAT/0050/11, the EAT distinguished between an employer trying to cure a breach that had already occurred and preventing matters from escalating into a breach. In Assamoi, the employer's decision to uphold the employee's grievance prevented a breach of the implied term of trust and confidence where the subject of the grievance itself had not amounted to a fundamental breach.

In Aberdeen City Council v McNeill [2010] IRLR 374 EAT, the EAT held that the employee was not entitled to terminate his employment contract by reason of his employer's conduct for the purposes of s.95(1)(c) of the Employment Rights Act 1996 because the employee was himself in breach of the implied term of trust and confidence at the time of his resignation. However, the Court of Session in McNeill v Aberdeen City Council (No.2) [2014] IRLR 113 CS, disagreed with the EAT and restored the employment tribunal finding of unfair dismissal. The Court of Session held that the employee's prior repudiatory breach of contract did not prevent him from terminating his employment.

In Atkinson v Community Gateway Association [2014] IRLR 834 EAT, the EAT, affirming the Court of Session decision in McNeill, reversed the employment tribunal decision to strike out the claim. The EAT held that, until an employer accepts the employee's repudiatory conduct as bringing the contract to an end, the contract is ongoing, and that, accordingly, a constructive dismissal claim is permissible.

In Hunter v Timber Components (UK) Ltd EATS/0029/09, the EAT held that an employee can claim constructive dismissal on the basis of his or her employer's breach of the implied term of mutual trust and confidence in relation to another employee. To succeed the employee must show that his or her employer's conduct was calculated or likely to destroy or seriously damage the relationship of trust and confidence between the employer and employee bringing the claim.

Additional resources on constructive dismissal/repudiation of contract

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As with any other legally binding contract, the contract of employment can be terminated by mutual consent or agreement between the parties to it: the employer and employee. If a contract of employment is terminated in this way the employee will have no entitlement to claim unfair dismissal. Courts and tribunals will, however, scrutinise the background to a "mutual termination" very carefully with a view to considering whether or not the form and the substance of the termination are consistent with one another.

If the facts surrounding the termination indicate that pressure was brought to bear by the employer on the employee to resign, it is likely to be determined that the employee was in fact dismissed. This should, however, be contrasted with a situation in which the employee agrees to the termination of his or her employment because he or she finds the terms of termination on offer from the employer to be acceptable.

In such cases there can be a very fine dividing line between termination by mutual consent and a dismissal by the employer. To some extent this issue will be determined by reference to the bargaining position of the respective parties. The court or tribunal will be interested to know whether there was an equality of bargaining position between the parties or whether in reality the offer was presented on a take it or leave it basis and used as a method of forcing the employee to "resign".

The following cases illustrate the range of situations in which this can become an issue, and how the courts have dealt with it.

No dismissal where the employee agrees to the terms on which the contract will be terminated: Birch and Humber v The University of Liverpool [1985] IRLR 165 CA. In circumstances in which the employee sought early retirement, the Court of Appeal held that there had been no dismissal. The contract had instead terminated by mutual consent.

In contrast, there will be a dismissal, notwithstanding the apparent acquiescence of the employee, if the termination is brought about by the actions of the employer: Hellyer Brothers Ltd v Atkinson and Dickinson [1994] IRLR 88 CA. The employees agreed to complete forms to terminate their employment in response to the employer's ultimatum that there was no more work. It was held that the employees were therefore accepting that the employer was going to terminate their employment and agreeing to complete the consequent paperwork.

In Sandhu v Jan De Rijk Transport Ltd [2007] IRLR 519 CA, the Court of Appeal held that a resignation implies some form of negotiation and discussion, predicating a result that is a genuine choice on the part of the employee. It did not accept that an employee had voluntarily resigned after agreeing severance terms with his employer at the same meeting at which he had been told that he was being dismissed.

Where there are a number of factors bearing on an employee's decision to resign it can be more difficult for the employee to argue that the threat of dismissal was the decisive or critical criterion: Jones v Mid-Glamorgan County Council [1997] IRLR 685 CA. The Court of Appeal rejected the employer's argument that to find that the employee had been dismissed would require that the threat of dismissal was the sole factor inducing resignation. However, it acknowledged that the existence of other factors may make it harder for an employee to argue that the threat of dismissal was decisive.

Evidence of dishonesty on the part of the employer in an attempt to persuade an employee to resign is likely to be influential in determining whether or not the contract has terminated by mutual consent: Caledonian Mining Co Ltd v Bassett and Steel [1987] IRLR 165 EAT.

Additional resources on termination by mutual consent

FAQs

Expiry of a fixed-term contract

If a contract has been entered into for a fixed period it will terminate automatically at the end of that term. At common law there will be no dismissal and no cause of action can ensue for breach of contract. However, for the purposes of a claim for redundancy or for unfair dismissal the expiry of the term will constitute a dismissal.

Section 95(1)(b) and s.136(1)(b) of the Employment Rights Act 1996 provide that, for the purposes of unfair dismissal and redundancy rights, an employee will be taken to be dismissed by the employer "where under that contract he is employed for a fixed term, and that term expires without being renewed under the same contract". However, in Royal Surrey County NHS Foundation Trust v Drzymala EAT/0063/17, the Employment Appeal Tribunal confirmed that the Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations 2002 (SI 2002/2034) "sit alongside the unfair dismissal regime" and compliance with them does not necessarily mean that a dismissal by non-renewal of a fixed-term contract will be fair.

The Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations 2002 took effect on 1 October 2002. They provide that where an employee has been continuously employed on successive fixed-term contracts for more than four years, any renewal of the employment at the end of the most recent fixed-term contract will be deemed to create permanent employment status, unless the employer can justify the continued use of a fixed-term contract.

A contract that is expressed to be for a fixed period but can be terminated earlier by notice is still a fixed-term contract for the purposes of the Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations 2002 because in the normal course of events it will continue until the fixed date: Allen v National Australia Group Europe Ltd [2004] IRLR 847 EAT.

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Termination by performance

If a contract of employment is entered into for the completion of a specific task or until the happening of a specific future event, the contract will terminate automatically on completion of the task or the happening of the specific event. Prior to the coming into force of the Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations 2002 (SI 2002/2034), unlike with the expiry of a fixed-term contract there was no dismissal.

In Brown and others v Knowsley Borough Council [1986] IRLR 102 EAT, for instance, the contract of a teacher at a College of Further Education provided that the appointment would last only as long as sufficient funds were provided by one of its financial sponsors. The employee claimed that she had been dismissed by way of redundancy and was entitled to a redundancy payment when her contract was not renewed due to a lack of funds. The Employment Appeal Tribunal found that there had been no dismissal; the contract had terminated on the happening of a specified event.

The Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations 2002 came into effect on 1 October 2002. They amended the law to provide that, for the purposes of bringing a claim for unfair dismissal or redundancy, the automatic termination of a contract on the happening of an event (eg the cessation of funding on a project) will amount to a dismissal.

Additional resources on termination by performance

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Frustration

A contract will be "frustrated" on the happening of an unforeseen event that renders performance of the contract impossible or substantially different from that which had been intended by the parties.

The burden of proof will rest on whichever party wishes to argue that the contract has been frustrated. Frustration arguments are rarely successfully argued in court or tribunal.

If a contract is frustrated there will generally be no dismissal. An employee will be deprived of the remedies in relation to unfair dismissal available under the Employment Rights Act 1996. However, if a contract is terminated by frustration an employee may claim a redundancy payment (s.136(5) of the Employment Rights Act 1996).

If the frustration occurs in a contract for a fixed term the employee will have no right to claim for the balance of the fixed term and in any event the employee will be deprived of his or her right to notice.

Frustration will most commonly occur where the employee has a prolonged or sudden illness or is imprisoned. However, in Four Seasons Healthcare Ltd (formerly Cotswold Spa Retirement Hotels Ltd) v Maughan [2005] IRLR 324 EAT it was held that the imposition of bail conditions that effectively prevented the employee from attending his place of work did not frustrate the employment contract.

If an employee has been absent from work due to illness for an extended period there may be a point at which the contract will become frustrated. It may also be relevant to consider whether or not the termination was in fact a dismissal due to a disability, as tribunals will be alert to this possibility. This might have implications for a claim under the Equality Act 2010.

The Employment Appeal Tribunal has developed some principles applicable to the doctrine of frustration of contracts of employment, particularly in the case of illness. In Williams v Watsons Luxury Coaches Ltd [1990] IRLR 164 EAT, it warned that tribunals "must guard against too easy an application of the doctrine".

Gryf-Lowczowski v Hinchingbrooke Healthcare NHS Trust [2006] IRLR 100 HC demonstrates that it can be difficult to show that a contract has been frustrated. Here the claimant was a doctor who was suspended for almost two years as a result of performance issues. The High Court held that the contract had not been frustrated because there was still a realistic possibility that a re-skilling course could be found for him and that he could resume his duties.

Additional resources on frustration

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Date of termination

When the employment relationship is finished there will be a date when the contract is regarded as having come to an end. Thereafter the parties have no contractual obligations to one another, except in relation to any obligations that are intended to continue to exist after termination such as restrictive covenants.

Much can turn on the date of termination, most particularly for enforcing statutory employment rights. It is important, both for contractual and statutory purposes, to ascertain the date of termination, not least because the limitation period for bringing a claim will run from that date.

In relation to contractual rights it is relatively simple to ascertain the date of termination: it is the date on which the contract comes to an end. If termination is with notice, the termination date coincides with the expiry of the notice period. If no notice is served the appropriate date will be the date the employee ceases to work (in the case of resignation) or the date the employee is summarily dismissed (in the case of a summary dismissal). Unlike the position in relation to a claim for unfair dismissal there is no common law provision that extends the legal date of termination beyond the date of actual termination.

The "effective date of termination" for the purposes of bringing a statutory unfair dismissal claim under the Employment Rights Act 1996 can be more complicated. It is examined in Termination of employment > Unfair dismissal > Effective date of termination.

In Société Genérale, London Branch v Geys [2011] IRLR 482 CA, the Court of Appeal held that Mr Geys' contract was terminated by, and on the date on which, a payment in lieu of notice was transferred into his bank account, even though he did not know at the time that this had happened. The Court of Appeal noted that the bank's handbook provided unambiguously that all that was required to effect termination was the making of the payment in lieu of notice and, once made, the payment terminated the employment "with immediate effect". Mr Geys appealed to the Supreme Court. In Société Générale, London Branch v Geys [2013] IRLR 122 SC, the Supreme Court found that it was not until 6 January 2008 when Mr Geys was deemed to have received the bank's letter of 4 January 2008 that it validly exercised its right to make a payment in lieu of notice and Mr Geys' employment was terminated. The Supreme Court stated that it is "necessary ... that the employee not only receive his payment in lieu of notice, but that he receive notification from the employer, in clear and unambiguous terms, that such a payment has been made and that it is made in the exercise of the contractual right to terminate the employment with immediate effect". Further, the Supreme Court held that a party's repudiation of an employment contract terminates it only if and when the other party elects to accept the repudiation; a repudiation does not automatically terminate an employment contract. The Court noted that automatic termination "can operate to the disadvantage of the injured party in a way that enables the wrongdoer to benefit from his own wrong".

Key references

Legislation

Employment Rights Act 1996
Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations 2002 (SI 2002/2034)
Equality Act 2010