Société Générale, London Branch v Geys [2011] EWCA Civ 307

The Court of Appeal determined, in accordance with the general principles of the law of contract, that the employee’s contract had terminated immediately when the PILON payment was made. The PILON clause expressly provided that all that was required to effect termination was the making of the payment and that, once made, the payment terminated the contract with immediate effect. There was no need for the employer to notify the employee that the payment had been or would be made.

The Court of Appeal commented that the date of termination of a contract at common law, and the ‘effective date of termination’ (EDT) that applies to unfair dismissal claims, are not necessarily the same. Whilst the EDT requires employees to have knowledge that they have been dismissed, at common law the parties are (subject to the use of clear and unambiguous words) free to agree the mechanics of how the employment contract is to be terminated, which could include doing away with the requirement to give notice altogether.

Implications

This case highlights the importance of ensuring that PILON clauses in employment contracts are drafted carefully and clearly. The case usefully illustrates the distinction between the method for calculating the “EDT” for the purposes of statutory employment claims (where knowledge of dismissal on the part of the employee is required), and the rules which apply at common law to determine when a contract of employment has terminated (where such knowledge may not be required).

Background

The employee in this case was a managing director of the employer bank and, at the time the PILON payment was made, he had no knowledge of having received it. There was a substantial difference in what he was due, in terms of pay and bonuses, depending on the date of termination of his contract. The result in this case was that the employee received a significantly less generous termination payment, (approximately €2.5 million less), than he would have been entitled to had the contract been terminated 2 weeks later.