Ms O’Farrell, an employee of Publicis Consultants UK Ltd, was dismissed on less than her three month contractual notice period. As part of her severance package, Ms O’Farrell received an “ex gratia” payment. The payment was described in the termination letter as being “equivalent to three months’ salary”.

As her contract did not include a right to pay in lieu of notice, Ms O’Farrell issued a claim for breach of contract.

The EAT agreed with the Tribunal’s decision and held that the payment was truly “ex gratia”; it could not be considered a payment that the employer was obliged to make under a contractual term. The employer was therefore obliged to make the additional payment.

Comment

This case provides a useful reminder to employers that care must be taken when drafting termination letters. The term “ex gratia” should only be used when the payment is a “gift”, as the tribunals and courts are unlikely to be sympathetic to employers and more likely to give employees the benefit of the doubt.  

Publicis Consultants UK Ltd v O’Farrell UKEAT/0430/10