In this legal update for employers we will consider the question:

Q: Can an employer retract notice terminating an employee’s employment?

In the recent case of CF Capital v Willoughby the Court of Appeal were asked to consider the communication and subsequent retraction of written notice to terminate an employee’s contract of employment and to decide whether or not the company’s actions were lawful.

The Facts

An Employer and Employee informally discussed the possibility of the employee leaving the company and, thereafter, working for it on a self-employed basis, during which she “expressed an interest” in the company’s suggestion and asked for further details. However, never formally agreed to a Termination of Employment and received no further communication regarding the issue.

Sometime later, she received a communication stating that her“employment would be terminated on December 31 2008” and that she would then be “immediately re-engaged on a self-employed basis”. Perplexed, the employee contacted the company and stated that she had “never agreed to this”. The company responded that there had been a “misunderstanding” over the discussions at the earlier meeting and offered to retain her on her existing contract. She refused to accept this and, instead, brought a claim for unfair dismissal at the Employment Tribunal.

The Decision

The company argued that it had “retracted the notice of dismissal” and that the employee was aware that the notice of dismissal was sent in error and should have disregarded it.

The Court of Appeal held that there was no misunderstanding following the original meeting – both the employer and employee had left the meeting knowing that the employee wanted to consider becoming self-employed. The dismissal letter therefore amounted to“unequivocal notice of termination [of employment]” and the employee was entitled to rely on it.  Despite the fact that the notice may have been issued in error, the company was aware of the fact that the employee had no wish to be dismissed.

What this means for employers?

Employers should be extremely careful about the content of letters sent to employees, especially concerning termination of employment, as once written notice of termination is served it can rarely be withdrawn.  This case highlights that even if an employer ‘mistakenly’ dismisses an employee, they can still be faced with a costly unfair dismissal claim at an Employment Tribunal unless in the case of extreme extenuating circumstances.

The Backhouse Solicitors Team

Tel:         01245 893400