The Employment Appeal Tribunal (EAT) has considered whether an employee was dismissed, and therefore entitled to bring a claim for unfair dismissal, after his employer invoked a contractual PILON clause following the employee’s resignation.
Fentem v Outform EMEA Ltd  EAT 36
The employee (F) resigned, giving his employer nine months’ notice of termination as required under his contract of employment. Prior to the expiry of this notice, the employer exercised its discretion to pay F in lieu of the remainder of his notice period and terminate his employment around a month early. F brought a claim for unfair dismissal.
An employment tribunal held that F had not been dismissed. His termination was by reason of resignation and the fact that the employer had elected to bring forward the date of termination by exercising a contractual pay in lieu of notice (PILON) clause did not mean that he had been dismissed. He was therefore not entitled to bring a claim for unfair dismissal. F appealed to the EAT.
The EAT has dismissed the appeal, upholding the tribunal’s decision that F had not been dismissed. The EAT referred to a previous decision (in the case of Marshall (Cambridge) Ltd v Hamblin  ICR 362) in which the EAT had concluded that a resignation was not converted into a dismissal when the employer exercised its contractual right to make a PILON. It was merely altering the date on which the employee’s resignation took effect.
The EAT in this case expressed some reservations about the legal reasoning of the previous decision in the Marshall case, but was unable to depart from the previous conclusion unless it could be said that it was manifestly wrong. Since it could not, the EAT had to follow the previous authority and dismiss F’s appeal.
Consequences of this decision
This decision confirms that when an employee resigns (and it is not a constructive dismissal), an employer can elect to exercise a contractual payment in lieu of notice to bring forward a termination date without it amounting to a dismissal in law.
The EAT can only depart from its previous decisions in very limited circumstances. The fact that the EAT has expressed reservations about the legal reasoning of the previous decision in the Marshall case suggests that if the case is pursued to the Court of Appeal, it could be overturned. We understand that the claimant is seeking permission to appeal.
The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at March 2022.