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Employment contracts - omitting the boilerplate can be costly for employers

25 April 2018
Glass enclave reception area of a corporate building
In the case of Newcastle upon Tyne NHS Foundation Trust v Haywood the Supreme Court held that, where the employment contract is silent on the matter, notice only takes effect when it comes to the attention of the employee and they have a reasonable opportunity to read that notice. A dismissal notice delivered while an employee was on holiday was not effective until she read it on her return and, as a result, the employee qualified to receive an unreduced early retirement pension at the employer's cost. 

Background

Mrs Hayward had been employed by the NHS in various guises for many years. Her employment was transferred to the Newcastle Upon Tyne NHS Foundation Trust on 1 April 2011 and the Trust soon decided that her role was to be put at risk of redundancy. In one of the initial consultation meetings, Mrs Hayward asked that nothing be decided from 19 to 27 April 2011 whilst she was away on annual leave in Egypt with her husband.

Despite this, the Trust sent Mrs Hayward her notice of termination by recorded delivery on 21 April, a mere two days after she had gone away. The recorded delivery slip was left at her home and was subsequently picked up by her father-in-law who had come to keep an eye on the house whilst Mrs Hayward and her husband were away. Mrs Hayward's father-in-law duly picked up the letter for her and left it at her house, which she then opened on return from her holiday, on 27 April.

On the peculiar facts of this case, it was crucial to know whether notice was given on or before 27 April due to Mrs Hayward's particular pension entitlement. If it were held that notice was given before 27 April, Mrs Hayward's 12 week notice period would have expired before her 50th birthday. If, however, it was found that notice was in fact given on 27 April when she opened the letter on her return, her notice period would have expired on her 50th birthday (20 July 2011). In this case, she would have been entitled to a non-actuarially reduced early retirement pension, which was a significant financial advantage to her at the employer's expense.

The NHS argued that the common law rule (derived from previous landlord and tenant cases) applied here, that notice was given when the letter arrived at Mrs Hayward's house. Mrs Hayward, on the other hand, relied on the EAT's approach in previous employment cases, that notice only took effect when it was actually received by the employee and they had read it or had a reasonable opportunity to read it.

It was Mrs Hayward's argument that won the day at every step of the way, with the trial judge, the majority of the Court of Appeal and the majority of the Supreme Court. The Court held that the common law rule was only clear cut in relation to delivery to a recipient's agent (i.e. someone expected to take in letters for the recipient as part of their role) – this was not the case of Mrs Hayward's father-in-law here. The EAT was the expert in the field of employment law and that was the prevailing law at the time the contract was entered into. Therefore, previous decisions of the EAT took precedence over common law decisions and was the law that should be followed. Accordingly, the NHS's appeal was dismissed.

Comments

This case acts as a helpful warning to employers not to sit back and relax and assume that notice has started to run just because they have sent out a letter of termination. The best way to avoid any ambiguity is to include express provision in the contract as to when particular types of notice take effect and/or to hand any notice to employees in person, where possible. This would provide certainty and prevent the unwelcome circumstances of Mrs Hayward's case arising again. Most boilerplate provisions of this nature are in contracts for a reason and employers should not remove them, even in the interests of brevity.

Further Reading

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