The timing of notice can have significant financial consequences. It often determines whether an employee is eligible for a bonus or other employment incentive.

In the case of Newcastle Upon Tyne Hospitals NHS Foundation Trust v Haywood, the timing of notice was relevant to whether or not the employee would qualify for a non-actuarially reduced early retirement pension. In the absence of an express provision, the Supreme Court held that there was an implied term that a notice to terminate the employment contract was only effective once it was drawn to the attention of the recipient and they had either read the notice, or had a reasonable opportunity to read it. This finding goes further than the position reached by the Court of Appeal and makes it even more important to have detailed service provisions in employment contracts.

Background

Mrs Haywood’s contract of employment was terminable on 12 weeks’ notice. If she was employed on or after her 50th birthday (20 July 2011) she was entitled to receive a non-actuarially reduced early retirement pension.

When her role was put at risk of redundancy in April 2011, Mrs Haywood asked if no decisions could be reached until she returned from a pre-booked holiday on 3 May 2011. The Trust refused to delay its decision-making and served notice by email and by recorded delivery on 20 April 2011. A recorded delivery slip was left at Mrs Haywood’s house on 21 April 2011. The letter was collected from the post office by Mrs Haywood’s father-in-law on 26 April 2011. Mrs Haywood received and read the letter in the early hours of 27 April 2011 when she returned from holiday. If notice was deemed received on 27 April 2011, she qualified for the early retirement pension as the notice would expire on her 50th birthday.

The Trust argued that common law principles established that notice was effective when it arrived at the recipient’s address. Mrs Haywood maintained that, based on Employment Appeal Tribunal case law, notice was only effective when received by the employee and they had read it or had a reasonable opportunity to do so. As we reported in May 2017, Mrs Haywood succeeded before the Court of Appeal who found that the notice had to be received, although there was no need for the employee to have read the contents.

Supreme Court decision

The Trust argued before the Supreme Court that there was a common law rule, derived primarily from landlord and tenant law, that notice was effective when it was delivered. As a secondary argument, the Trust also maintained that Mrs Haywood’s father-in-law was acting as her agent when he took delivery of the notice.

The majority in the Supreme Court dismissed the Trust’s appeal. Lady Hale and Lady Black found that the common law rule in non-employment cases was not as clear and universal as the Trust suggested. In these cases, receipt was required in some form and the presumption of receipt was rebuttable. A number of the cases concerned delivery to an agent (whether that was a servant, professional agent or family member). The Supreme Court rejected the suggestion that Mrs Haywood’s father-in-law was acting as her agent. Where the Trust relied on a case outside landlord and tenant law, it was significant that it concerned delivery to a commercial concern rather than a private home. As Lady Black observed in her more detailed examination of the authorities, the Trust had adopted a narrow approach to the authorities.

The approach taken by the EAT to the question of service of notice was correct. The Supreme Court noted that the EAT was an expert body that was familiar with employment practices. The EAT had adopted a consistent approach to the question of notice since the 1980s in the context of disputes about qualifying periods of service. These cases confirmed that notice had to be communicated and that the employee must have read, or been given a reasonable chance to read, the notice.

The Trust expressed concern about these decisions from a public policy perspective, arguing that it would make it too difficult for the employer to have certainty regarding the effective date of notice. However, the Supreme Court dismissed these concerns. If the employer wanted certainty it could either:

  • include suitable drafting in the contract;
  • give notice to arrive in good time; or
  • communicate the termination in person.

It was important for an employee to know whether or not he or she had a job and the position would be the same whether the contract of employment was terminated summarily or with notice.

What does this decision mean for employers?

The Supreme Court decision confirms the importance of having clear, contractual provisions that detail how and when notice is served. These provisions should cover all forms of communication, including post and email, so that costly disputes about the timing and effectiveness of notice can be avoided.

Where the timing of notice has great financial significance, employers may prefer to exercise caution and terminate face-to-face to avoid any disputes about whether the other forms of service were effective and/or whether express provisions regarding deemed service have an adverse impact on protected groups (such as employees on long-term sick leave or maternity leave).

We are also likely to see senior executives seeking to re-negotiate express terms to bring them closer to the implied term that notice must be communicated and that the employee must have a reasonable opportunity to read the contents.