Employment update
Employment practice and procedure update: When does contractual notice take effect?
Ann Wood considers the implications of the ruling in Newcastle upon Tyne NHS Foundation Trust v Haywood [2017] IRLR 629; [2017] EWCA Civ 153.
About the author
Ann Wood is a senior lecturer in the School of Law at the University of Huddersfield.
Mrs Haywood was employed as an associate director of business development by Newcastle Primary Care NHS Trust from 1 November 2008 until 1 April 2011. Due to a merger of bodies in the NHS, her contract of employment was then transferred under the Transfer of Undertakings (Protection of Employment) Regulations 2006 SI No 246 to the appellant. The respondent was entitled to 12 weeks’ contractual notice under her transferred contract of employment.
Following the transfer, the respondent was informed by letter, and at a subsequent meeting, on 13 April 2011, between herself and two of the employer’s representatives, that she was at risk of redundancy, but that no final decision had been taken. At the meeting, the respondent accepted that her post was redundant, but asked that no decision be made in her absence; this was not agreed. The respondent also told her employer that she had booked a holiday in Egypt.
She then went on sick leave due to stress later that day. On 18 April, the respondent went on annual leave and flew to Egypt on 19 April.
Mrs Haywood’s 50th birthday was to be on 20 July 2011; clearly with a view to avoid payment of an enhanced pension to the respondent (which would have been due if she was still employed by the trust on or after that date) the employer sent her three letters on 20 April (at least one of which was wrongly dated 21 April). The letters stated: ‘I wish to confirm that by way of this letter I am issuing you with 12 weeks notice that you will be dismissed by reason of redundancy on Friday 15th July 2011’ (para 78). One of the letters was sent by ordinary post, one was sent by e-mail to Mrs Haywood’s husband’s e-mail address, and one was sent by recorded delivery. A slip showed that delivery of the recorded delivery letter had been attempted on 21 April; however, no one was present at the respondent’s home address to sign for the letter, and it was returned to the sorting office. On 26 April, the respondent’s father-in-law, acting without her instructions, collected the recorded delivery letter and left it for her at her home.
Mrs Haywood arrived home in the early hours of 27 April and went to bed. At 8.30 am that day, she opened one of the letters sent by the appellant (likely to have been the one sent by recorded delivery, although the high court judge at first instance was not clear on this issue). The respondent also said that her husband did not read the e-mailed letter until 10.14 am that day, and that in any event she had not given the appellant permission to send communications to her at her husband’s e-mail address.
It was accepted that Mrs Haywood’s employment had been terminated by reason of redundancy. The main issue for the high court judge at first instance was whether or not Mrs Haywood had received the 12 weeks’ contractual notice to which she was entitled before her 50th birthday on 20 July 2011. It was the trust’s case that her notice period expired on 15 July; Mrs Haywood’s case was that her notice did not expire until on or after 20 July.
The judge took the view that notice had only been given once Mrs Haywood had actually read a letter of dismissal, on 27 April, so that the contents were communicated to her, and she was therefore entitled to a higher pension. The trust appealed.
In the Court of Appeal, Mrs Justice Proudman and Lady Justice Arden found in favour of the respondent, but for different reasons. Lord Justice Lewison dissented.
The court considered a wide range of case law on the communication of notices, including in the law of landlord and tenant, agency agreements and commercial contracts. In particular, two cases were thought to be of significance:
- Societe Generale, London Branch v Geys [2013] IRLR 122; [2012] UKSC 63; and
- Gisda Cyf v Barratt [2010] IRLR 1073; [2010] UKSC 41.
Mr Geys was a managing director of Societe Generale bank. He was given a letter informing him of the bank’s decision to ‘terminate your employment with immediate effect’, at a meeting on 29 November 2007 (para 9 of the Societe Generale transcript). He was then escorted from the building. Despite some correspondence and a sum of money paid into his bank account, there was no mention of the bank’s operation of the payment in lieu of notice (PILON) clause in his contract until he received the bank’s letter of 4 January 2008.
The Supreme Court decided that the bank had failed to operate the PILON clause lawfully, and did not terminate the appellant’s employment until 6 January 2008 (under the contract, the notice was deemed to have been received by the appellant on the second day after posting).
Gisda Cyf v Barratt
Ms Barratt was alleged to have behaved inappropriately at a private party. She was suspended from her employment, and a disciplinary hearing was held on 28 November 2006, at the end of which Ms Barratt was told that she could expect to receive a letter informing her of the outcome two days later. Delivery of the letter took place on the day anticipated, ie, 30 November by recorded delivery; however, Ms Barratt was away from home for several days visiting her sister, who had just had a baby, and did not receive and read the letter until 3 December. The letter informed Ms Barratt that she had been summarily dismissed for gross misconduct. She issued proceedings for unfair dismissal in the employment tribunal. The issue arose as to whether the claim had been issued within three months of the effective date of termination.
The Supreme Court held that the claim for unfair dismissal had been brought in time; the limitation period ran from the date the employee read the letter, or had a reasonable opportunity of so doing, rather than from the date when the letter was posted or delivered or the date the employer decided to dismiss.
The Court of Appeal in Haywood (Proudman J and Arden LJ) held that as there was no written term in the contract of employment, it was necessary to imply a term which permitted the parties to give written notice of termination and to send it by post. It was a separate question, however, as to whether the notice was effective; in addition, it was not possible to imply that said notice would be effective on a particular date because there were too many options concerning when a notice could be said to have been served (ie, the date the notice was put in the post, or the date the notice was received, or the date the notice would have been received in the ordinary course of post or a specified number of days after posting).
If the parties wanted to specify one of the options, they could have done that by an express term in the contract of employment, but did not do so in this case; the contract dealt with the length of the period of contractual notice, but not when the notice was to take effect. The date the notice took effect was, therefore, governed by common law principles.
However, the notice also had to be received, and there is a difference between delivery and receipt: receipt can occur even if the recipient never opens a notice, and a notice that is physically delivered to a person’s home is not necessarily received by them.
Employment update
When a letter is shown to have been sent to a person’s last known address (for example, by recorded delivery) there is a rebuttable presumption that it has been received by that person unless the contrary is shown. A notice may arrive at a person’s home and not come to their attention through no fault of that person. In Mrs Haywood’s case, the notice was not received until she opened it on 27 April. However, reading the notice or actual notice of the contents was not necessary in order for it to have been received. In addition, Mrs Haywood’s father-in-law was not her agent: he had no authority to receive the notice for the respondent, and she did not, therefore, receive the notice when he left it at her house on 26 April.
All three judges took the view that the notice sent by e-mail, without authority or permission, to Mr Haywood’s e-mail address, was not effective.
Many of the cases in this area, while helpful, relate to statutory rights and the effective date of termination (such as Gisda Cyf) rather than to the date of contractual notice. Mrs Justice Proudman accepted that Geys, which focused on a contractual PILON clause, was different from Haywood and that Lady Hale’s comments in Geys were not, therefore, directly relevant; nevertheless, she felt it important to refer to them:
… it seems to me to be 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. These are the general requirements applicable to notices of all kinds and there is every reason why they should also be applicable to employment contracts. Both employer and employee need to know where they stand. They both need to know the exact date upon which the employee ceases to be an employee (Newcastle upon Tyne NHS Foundation Trust para 116; Geys para 57, per Lady Hale).
Proudman J took the view that Lady Hale was laying down a general rule that certainty is paramount and there is a requirement for notices in employment contracts to be communicated. The contents of the letter to Mrs Haywood, therefore, had to be communicated to her before the notice took effect, and there was no communication before 27 April; the notice did not expire before the respondent’s 50th birthday, and she was entitled to an enhanced pension.
Arden LJ took the view that there was no ‘Geys implied term’ in this case (para 129). Geys established that the trust had to communicate notice of termination to Mrs Haywood, but was not authority on the question of when notice is given (no decision on this issue was necessary in Geys as there was a contractual ‘deemed service’ term which took effect two days after posting).
Arden LJ reviewed the relevant case law: ‘I see nothing in the authorities to the effect that once a notice has been delivered to a person’s home, there is an irrebuttable presumption that it was received by that person (para 147). According to her, the judge of first instance:
… was entitled to look to the time when the respondent [Mrs Haywood] found the letter containing the notice and to hold that in all the circumstances the respondent did not receive the notice, which seems to me to mean delivery of it, until 27 April 2011…
... 27 April was both the date she arrived home and the date she read the letter … she received it at about 8 am that day … I accept that she did not need to read the letter, but she (or agent) needed to receive it (paras 148 and 149).
Lord Justice Lewison disagreed with the majority view. He felt that the authorities showed that notice was properly given when it reached its intended destination, and Geys did not require the content to be communicated; this applied whether or not the addressee was there to open the notice. Mrs Haywood’s father-in-law had acted as her agent in collecting the letter, and it was delivered when he took it to the respondent’s home on 26 April.
In Lewison LJ’s view neither Gisda Cyf nor Geys cast doubt on common law contractual principles. It made no difference that the contract was a contract of employment, and no special rules applied.
It is surprising that direct precedent is lacking on the issue of when contractual notice to terminate employment takes effect, especially given the potential consequences in monetary terms to the employee. As Lady Hale pointed out in Geys, lucrative contract rights, such as bonuses, life insurance and health insurance (and state benefits) are all capable of being affected by a lack of certainty in this area. In this case, following the decision of the Court of Appeal, Mrs Haywood is currently entitled to a pension of around £200,000.
It is, therefore, to be regretted that the outcome in the Court of Appeal was only a majority decision, and that the two judges who found for Mrs Haywood took different views as to the effect of Geys and about the reasons for their respective decisions. As a result, the issue cannot be considered as settled.
However, if there is to be an appeal to the Supreme Court, Lady Hale and her colleagues may have the opportunity finally to resolve the matter, and it seems likely that the appeal will be upheld in the terms advanced by Proudman J