Legal

Understanding your legal rights when employees leave

5 Jan 2018 By Maria Hoeritzauer

When an employee leaves, the focus is often on their entitlements. But what are the company’s rights and what practical steps can be taken for a smooth exit? 

When it comes to employees giving notice, there are several key areas to note. Employers do not have to ‘accept’ a resignation – it is a unilateral act. Equally, they do not have to accept a retraction of notice, unless it was given in the heat of the moment, or the employee was unwell.

Employees must give at least a week’s notice once they have been employed for more than a month and a court can impose a longer period if it is ‘reasonable’. However, longer notice is usually set out in the employment contract.

There is no entitlement to be paid instead of being asked to work notice. Employees can still be disciplined for misconduct, refusal to follow reasonable instructions (such as carrying out a handover) or failing to attend work during this time.

If the employee starts work for someone else in their notice period, it is possible to obtain an injunction to prevent them starting with their new employer and there is no obligation to pay them if they do not come to work.

If the contract allows, it may be commercially preferable to put the employee on ‘garden leave’ for some or all of the notice period. During this time, they remain an employee, are not required to attend the office and should be prevented from contacting clients, suppliers and colleagues, but they continue to owe all the usual duties of confidentiality and fidelity to the business. Garden leave must be for a reasonable and proportionate duration only and the contract may reduce post-termination restrictions by the garden leave period.  

Employers may consider making a payment in lieu of notice (PILON) if there is a contractual right to do so. A PILON ends the employment immediately and, depending on the contract wording, can have cost savings for the business if calculated on basic salary only, rather than salary plus benefits. While a PILON can be made without a contractual right, this is a breach of contract and full losses including holiday pay accrued during the notice period must be paid.

Company property and reclaiming training costs

Employers are also entitled to the return of their confidential information and company property, including passwords and logins, and this should be stated in the employment contract.

Subject to the terms of the relevant schemes, employers can seek repayment of money owed by the employee; for example, season ticket loans or cycle to work schemes. Training costs (and the like) can be reclaimed, provided the repayment terms are reasonable and proportionate. Check that there is a signed contract confirming that deductions can be taken from a salary, otherwise it is an unlawful deduction.

Restrictive covenants

Employers can lawfully restrict employees’ activities after the employment ends regarding confidentiality, intellectual property and, in some cases, contacting clients or colleagues and working for a competitor. But restrictions will only be enforceable if they are reasonable and proportionate ways of protecting a legitimate business aim and take into account things like the role carried out by the employee, their knowledge and workforce stability. However, if an employee has been placed on garden leave or paid a PILON without a contractual right, these restrictions will usually be invalid.

Steps for a smooth exit

Businesses should check the employment documents and identify their own commercial requirements or risks. For example, does the employee owe the employer any money, or need to sign any intellectual property papers? The exit interview should be used to find out their potential future plans and to remind them, in writing, of their ongoing obligations to the company.

Maria Hoeritzauer is an associate at Crossland Employment Solicitors

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