Legal

When does notice of contract termination take effect?

16 May 2018 By Kate Brearley and Richard Freedman

The Supreme Court has ruled that notice begins when the employee opens and reads the letter, not when it is sent. Kate Brearley and Richard Freedman report

In Newcastle upon Tyne Hospitals NHS Foundation Trust v Haywood, the Supreme Court's decision on when notice took effect would determine whether or not Mrs Haywood's employment terminated before her 50th birthday. If it did not, she was entitled to a significantly higher pension.

It is well-established that express terms trump implied terms. As the Supreme Court pointed out in Haywood, it is open to the parties to agree expressly in the employment contract not only how notice can be served, but also when it takes effect.

In Haywood's contract there was no such express clause. The Supreme Court had previously held (Gisda Cyf v Barratt) that in the context of statutory employment claims, notice sent by letter is effective when the employee reads the notice or has had reasonable opportunity to do so.

In Haywood, the trust argued that the position was different under common law and mere delivery to Haywood's home sufficed, despite it knowing she was on holiday and would not receive or read the letter for more than a week. The majority of the Supreme Court disagreed, finding that the common law rule was not as clear and universal as the trust suggested and that the same implied term should apply whether the effectiveness of the notice was being considered from a statutory or contractual perspective. In the words of Lady Hale: “It makes obvious sense for the same rule to apply to all notices.”

For the future, employers should ensure their employment contracts address the mechanics of how notice is given and when it takes effect. It is already becoming quite common to provide for email as a method of serving notice, with that notice taking effect from the time the email is sent. Lord Briggs, in his dissenting judgment, suggested that it will not be long until most notices in employment contracts will be sent electronically. It is also foreseeable that the trend may spread to other types of electronic communication such as WhatsApp and texts. 

Wider ramifications

Will a clear express term solve all problems when it comes to effecting notice of termination? Undoubtedly it will go a long way to clarifying matters but it may not remove uncertainty in all cases. Because there was no express term addressing when notice took effect, the Supreme Court in Haywood did not have to consider whether such a term could be rebutted by showing evidence relating to actual receipt. This residual potential uncertainty is a reminder that the old-fashioned method of personal service will still be the best. 

There is also a question of whether a person can be taken as acting as an agent of an employee to receive notice on their behalf. In Haywood, the trust argued that Haywood's father-in-law was acting as her agent when he collected the recorded delivery letter from the Post Office and took it to her home, which he was looking after while she was on holiday. The Supreme Court unanimously rejected that argument. Except in the clearest possible cases it is inadvisable for an employer to seek to rely on notice taking effect by receipt by an agent. 

Similarly, using an email address that the employee may use only occasionally as a means of communication, and particularly where it isn't the employee's own address, will not be effective. Employers that want the option of serving notice by email, which may well become the norm, should include an express term to that effect identifying the employee's email address. 

Finally, savvy employees, shortly to be eligible for a valuable benefit, may become more difficult to contact if they believe their employment is at risk of being terminated. In some cases holidays may be timed so that they are intentionally away from home in the lead up to the key date. Employers wanting to ensure that termination takes effect before that key date should take extra care to ensure that the employee receives the notice. The price of a courier to a hotel abroad, for example, could pale in comparison to the cost of the benefit in question.

Kate Brearley is a partner and Richard Freedman an associate at Stephenson Harwood

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