The Court of Appeal has ruled that an employer cannot unilaterally withdraw an intended and unambiguous notice of termination of employment even if it was given in error.

From time to time some employers make mistakes and accidentally sack well regarded and successful employees. The courts have recognised that people are occasionally irrational and act in the 'heat of the moment' – the case law has held that in such circumstances there was no real intent to resign or dismiss and therefore the act can be undone once heads have cleared.

However, in the recent matter of CF Capital and Willoughby, the Court of Appeal was asked to consider a case where an employee was invited to consider moving from full-time employment to self-employment in order to cut costs and then dismissed before suitable re-engagement was agreed.

The employer sent the employee a letter on 22 December 2008 informing her that her employment would terminate on 31 December 2008 and her new self-employment relationship would begin on 1 January 2009. The employee told her employer on 5 January 2009 that she had did not agree to the terms of the re-engagement and she considered herself dismissed. The employer apologised for the misunderstanding and said that the termination was withdrawn and she should carry on as before. The employee rejected the unilateral withdrawal of the termination and sued for unfair dismissal.

At first instance the ET dismissed the claim on the basis that they believed the employee had resigned and had not in fact been dismissed. They noted that the purported dismissal letter was unambiguous but it was based on a false premise - namely that it was agreed that the claimant would become self-employed when in fact this was not the case - therefore the intended result was not achieved. The ET cited the 'special circumstances' exception found in many contract law cases and usually deployed to assist with dismissals or resignations that are in the heat of the moment and unintended. The ET ruled that, once the misunderstanding was revealed, the termination was 'withdrawn timeously' by the employer

The EAT and Court of Appeal overruled the ET saying that it had made errors in law and judgment. Firstly, a notice of dismissal cannot be unilaterally retracted but can only be withdrawn by consent (Riordan v The War Office [1959]). Secondly, the objective intent of the letter of 22 December 2008 was to dismiss. Thirdly, the so-called 'special circumstances' cited were irrelevant because the case law (Sothern v Franks Charlesly & Co [1981], Martin v Yeomen Aggregates Limited [1983], Barclay v City of Glasgow District Council [1983] et al.) is almost entirely related to oral 'heat of the moment' cases where there was no intent to dismiss or resign; this was not the case here. The contract was terminated by the original letter and accepted by the employee on 5 January 2009 – the attempt to withdraw failed. The Court of Appeal noted that there were clearly additional issues of wrongful dismissal due to the inadequate notice period but these were not raised by either side.

This case demonstrates a complete failure of communication by the employer. The employee had asked for details of the new arrangement a number of times but received none. The employer had intended to dismiss the employee but had neglected to check with the employee that this was agreeable. It took the employer by surprise when the employee accepted the dismissal instead of the faulty self-employment deal and led to nearly three years of costly litigation when the employer was attempting to recover from recession.