Employment Update: Dismissal/resignation

21 June 2007

Even where an employee leaves by mutual consent and severance terms are negotiated, he or she may still have been ‘dismissed’ and thus able to bring an unfair dismissal claim.

In Sandhu v Jan de Rijk Transport the Court of Appeal has recently considered the circumstances in which a resignation may in reality be a dismissal.

In this case, the employee was summoned to a meeting without being told why. The meeting began with his manager saying ‘Your contract, we are going to finish it’ and then allegations of misconduct were raised against him. It was proposed that his contract should terminate in three weeks but he successfully negotiated different terms - that he should remain employed for a further three months and then leave. He then claimed unfair dismissal, arguing that he did not choose to resign but was dismissed. The Court of Appeal agreed. He was just ‘doing his best… to salvage what he could from the inevitable fact that he was going to be dismissed’. He was entitled to claim unfair dismissal.

Points to note:

  • It is sometimes difficult to decide whether an employee has been dismissed or resigned or the parties have simply agreed terms on which his or her employment contract will terminate. For employers wishing to avoid the risk of an unfair dismissal claim, it will always be best to have a binding compromise agreement with the employee, which complies with the terms of s.203 of the Employment Rights Act 1996. This is the only effective way in which an employee can waive his or her right to bring an unfair dismissal claim. The terms of the agreement must be tailored to the particular circumstances of the case. Legal advice is essential and we have the expertise and experience to provide appropriate wording.

  • Where an employee resigns during an interview in which the question of dismissal has already been raised, the Courts are likely to say that what has taken place is in fact a dismissal or a constructive dismissal. The employee will be taken to have no genuine choice in the matter. There is a difference between the employee being under threat and unpressurised negotiation. On a negotiated resignation, the employer should always allow the employee time to consider the proposal being put to him or her, or risk an unfair dismissal claim.

  • However, the Courts accept that, in ongoing disciplinary proceedings, the opportunity to negotiate an agreed form of resignation may often be appropriate and in the interests of both parties. The use of a compromise agreement is always to be recommended.