The EAT has held that giving an employee notice that the terms of their contract will be changing constitutes a dismissal.

The employees were contractually entitled to a leased car for an indefinite period of time. The employer wanted to withdraw this entitlement but when the employees would not agree to vary their contracts the employer gave them written notice terminating their contracts and subsequently sent another letter re-engaging them on a new contract with no entitlement to a car. The employees signed the new contract and brought a claim for unfair dismissal. 

The tribunal held that because the employees had signed the new contracts the variation was consensual and therefore there had been no dismissal.

On appeal the EAT held that there had been a dismissal because the employer had written to the employees terminating their existing contracts. The fact that they had been reengaged was not relevant here. In reaching this decision the EAT relied on s95(1)(a) of the Employment Rights Act 1996, which provides that an employee is dismissed if the contract under which he or she is employed is terminated by the employer. The EAT also stated that the question to ask is how a reasonable recipient would have understood the notices bearing in mind the context. Given the facts, the EAT held that the reasonable recipient would have read the notice as meaning that if they wanted to remain employed they would have to sign new contracts, otherwise the notice of termination would take effect without any re-engagement.

Darby and anor v The Law Society of England and Wales