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Unfair Dismissal

Employee paid in lieu of notice-when did employment end for unfair dismissal purposes?

If you are unfairly dismissed and you are paid in lieu of notice when does your employment end? When you have been given the notice and payment, or when the notice period would have expired?

This is of huge significance because if you want to bring a claim for unfair dismissal, for example, you need 12 months’ service in the workplace. What happens if you are fired just short of reaching the 12 months’ service period?

This was the issue in the case of Action Health Enterprises Limited and Michael D’Arcy. D’Arcy brought a claim for unfair dismissal to the WRC and had been awarded €45,000. This decision was appealed to the Labour Court.

The facts

The dates in this case are of vital importance; D’Arcy commenced as an employee on 31st January 2017 and was dismissed on 30th November 2017. Even though he had a 3 month notice period entitlement in his contract of employment he was given a letter telling him that he was being paid for the 3 months but his employment ended immediately.

He received the payment on 17th December 2017 after his solicitor had sent a letter seeking payment. His contract had provided

Termination with Notice:

“… employment may be terminated at any time by either you or the Partnership giving the other party at least three months ‘prior written notice, or statutory notice, if greater.”

“Where notice of termination of our employment is given, whether by you or the Partnership, the Partnership will have the right to:

Pay you in lieu of notice the amount of your entitlement to basic salary in respect of all or part of such notice period;”

Action Health Enterprises Limited appealed the WRC decision to the Labour Court on the basis that D’Arcy did not have the necessary 12 months’ service to bring an unfair dismissal claim.

Action Health argued that the employment ended on the giving of notice and brought the employment to an immediate end by exercising its contractual right to pay him in lieu of notice.

He argued that the Minimum Notice and Terms of Employment Act 1973 does not prevent the parties agreeing to accept payment in lieu of notice and, accordingly, the date of termination was 30th November 2017. If this was accepted then D’Arcy did not have the 12 months’ service to bring the unfair dismissal claim.

It was also argued that even if no notice was given to the employee the earliest date of termination would be the date that complied with the provisions of the Minimum Notice and Terms of Employment Act 1973. This would be 1 week later giving a date of dismissal of 7th December 2017 which would have been insufficient for the employee to bring the claim.

The argument was that there is nothing in the Minimum Notice and Terms of Employment Act 1973 or in the Unfair Dismissals Act 1977 preventing an employee from agreeing to pay in lieu of notice.

Sections of “Dismissal Law in Ireland” by Mary Redmond were advanced by the employer’s legal representative:

“If a contract lays down a notice period, it will technically be a breach of contract to give pay in lieu of notice unless this right is reserved to the employer. If it is, and an employee accepts payment of wages in lieu of notice, the date of dismissal will be the date on which termination takes effect, as the contract will have been determined in accordance with its terms. If there is no right to give pay in lieu of notice in the contract the EAT will treat the case as a no notice one and will add on the contractual or statutory notice whichever is the greater”.

As an aside, it is worth noting that the only circumstances in which the legislature saw fit to provide that notice should be automatically added onto service was for the purpose of calculating the amount of a redundancy payment.

Section 7 Minimum Notice and Terms of Employment Act, 1973 states:

7.—(1) Nothing in this Act shall operate to prevent an employee or an employer from waiving his right to notice on any occasion or from accepting payment in lieu of notice.

(2) In any case where an employee accepts payment in lieu of notice, the date of termination of that person’s employment shall, for the purposes of the Act of 1967, be deemed to be the date on which notice, if given, would have expired.

D’Arcy’s legal team argued that the contractual notice provision supersedes the Complainant’s entitlement under the 1973 Act, therefore, the Complainant was entitled to three months’ notice of termination. They argued that the date of dismissal for the purpose of the Unfair Dismissals Act 1977 includes the notice period, whether worked or not.

They relied on Redmond on Dismissal Law which states:

“the Unfair Dismissals Act, as amended, deems the date of dismissal to be the date on which notice, had it been given, would have expired. In practice, this can mean there is a crucial distinction between the employee‘s date of termination (when he or she ceased to be an employee pursuant to the contract of employment,) and his or her, date of dismissal (the date that is reckonable for the purposes of establishing the length of services qualification and the time limit rules under the Unfair Dismissal legislation)”.

In other words even where the parties agree to contractually bring the contract to an end the parties cannot override the statutory provisions of  the Unfair Dismissals Act 1977 concerning the date of dismissal.

Labour Court Decision

The Labour Court had to decide whether the date of dismissal for the purpose of the Unfair Dismissals Act 1977 was 30th November 2017 or 3 months later when the notice period would have ended. If it was 30th November 2017 he did not have the necessary service to bring the claim; if 3 months’ later he did have the necessary service.

Firstly, the Labour Court recognised that this was a complex issue and was not “definitively settled”.

Secondly, they held that the employee could waive his right to notice in accordance with the 1973 act as follows:

“Nothing in this Act shall operate to prevent an employee or an employer from waiving his right to notice on any occasion or from accepting payment in lieu of notice”.

It noted that when he was dismissed he did not receive any pay in lieu of notice. He only received it when his solicitor wrote to the employer seeking it.

This action, the Labour Court held, approbated or approved the contract because he sought the payment pursuant to the term of the contract which referred to terminating the contract without notice and the employee accepting payment in lieu.

The Labour Court held that the date of dismissal is 30th November 2017 as that was the date the employment came to an end in accordance with his contract of employment. That being the case he did not have the necessary locus standi to bring the unfair dismissal claim under the Unfair Dismissals act 1977.

The Labour Court overturned the WRC decision. Read the full decision here.