This article first featured in People Management

Making a PILON payment, without notifying the employee, can terminate an employment contract and start the clock ticking for a tribunal claim. The Court of Appeal has handed down a decision that may be music to the ears of overworked HR departments, but which may have unsatisfactory implications for employees faced with summary dismissal.

Geys brought proceedings against his former employer, Societe Generale, for money owed to him as a result of his employment being terminated. As he worked for the bank in London, the case was heard in the English courts. He was successful in the High Court, and the bank appealed the decision.

A lot of the argument concerned the termination date. The Court of Appeal decided that an employer merely needs to make the notice payment to an employee to exercise its right under a ‘payment in lieu of notice’ (PILON) clause, which has the effect of terminating employment ‘with immediate effect’. There was nothing in Geys’ PILON clause that required the employer to give him notice that it intended to exercise its PILON right.

However, the effect of the decision is this: if employees with PILON clauses are told they are being summarily dismissed, the onus is on them to check their bank accounts regularly to see if they have received any payment from their employer. They will then have to calculate whether that could amount to a notice payment and then work out the date of termination accordingly.

Employees may not check their bank account for weeks if, as in the Geys’ case, this were to happen over a holiday period. Their employment could have been formally terminated without them even knowing it, leaving them not only unemployed but possibly without the benefits that they, and maybe their families, enjoyed during employment, such as medical and life insurance. Not knowing the termination date also affects employees’ right to claim unfair dismissal as they only have three months from the date of termination to do so.

It is difficult to see how the court’s decision is not going to create confusion, or worse, injustice, for employees. They are entitled to be notified as to whether they will be expected to work their notice, or will be receiving a PILON payment and, more importantly, confirmation of their date of termination. It should not be left to employees to do the maths. And what if the parties reach a different answer?

Unless the decision is overturned, employers should ensure that the wording of any PILON clause is clear. It should say whether the employee will be notified of the employer’s decision to exercise its PILON right, or whether the employment contract will be terminated at the point of the notice payment to the employee. Either way, regardless of the precise contractual wording, employers should at least make the position clear to the employee to minimise the risk of a fight in the courts over the date of termination.

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