The Court of Appeal has overturned a High Court decision by ruling that an employer did not need to tell an employee that his employment had been terminated pursuant to a payment in lieu of notice (PILON) clause in order for the termination to take effect. (Societe Generale, London Branch v Geys). Mr Geys' contract of employment stated that termination would be effective when the PILON monies were paid into his bank account. There was no requirement to notify him of this payment, and it made no difference that the monies had been in his bank account for some time without him realising.

The Court of Appeal interpreted the PILON clause strictly, saying that to do anything else would be "an unjustified re-writing" of the clause. All that was required by the clause was the payment of monies, and that was the point at which termination was effected. Employers should aim to make their contractual terms as clear as possible to avoid a situation where an employee is not sure whether or not his contract has been terminated, thus avoiding potentially lengthy litigation. This is especially important where, as was the case here, the termination date affects the employee's entitlement to valuable contractual benefits.

It should be noted that this decision does not affect the statutory concept of the effective date of termination for the purposes of bringing an unfair dismissal claim, which is distinct from the question of when, as a matter of common law, the contract terminates.