Be Aware – December 2023
What is a payment in lieu of notice?
“Unfortunately I am having to consider a number of redundancies. If I terminate an employee (or they resign) and I want to make a payment in lieu of notice instead of them working their notice period, do I still record their last working day as the date at the end of the one-month notice period?”
No, it is a bit of a common myth that the effective date of termination (i.e. last working day with the company) still falls at the end of what would have been the notice period where a payment in lieu of notice (PILON) is made.
A PILON is effectively “instead of” the employee working their notice period. This means therefore that you are cutting all employment ties with them on their last working day and whatever their notice period is (be it through dismissal or resignation), it is paid as a lump sum payment in their final salary.
Put in practice therefore if an employee resigns on 1st May 2016, they have a one month notice period and therefore if they were required to work their notice their effective day of termination and last working day would be 31st May 2016. Both parties agree it is not in either of their interests for the employee to work and therefore as there is provision for a PILON in the employee’s contract, the employee will stop working on 1st May itself. The one month’s salary is still payable and is paid in the company’s May payroll however, the employee’s effective date of termination is 1st May 2016 because the PILON acts to remove what would have been the notice period.
It can also work part way through a notice period. Therefore, if an employee had served notice to resign on 1st May but the employer only needed them for a couple of weeks they could, for example, stop working on say Friday 13th May and the remainder of their notice period i.e. 2.5 weeks approximately, would be the PILON. In this scenario therefore the effective date of termination would be Friday 13th May because it is the last day, they are physically attending work and the remaining notice is paid instead of it being worked.
NB this is not the same scenario where an employee is placed on garden leave. Garden leaves seeks to continue the contract of employment albeit the employee is effectively suspended from their duties and stays at home for the duration of their notice period.
If in doubt when seeking to exercise a PILON clause, please contact the MILS employment team.
“I have an employee whose attitude and performance is poor. Rather than taking the employee through a capability procedure can I explore with the employee whether he/she would be open to mutually agreed termination by agreeing a settlement package with them? Is it safe for me to initiate settlement discussions with the employee in this instance?
Section 111A of the Employment Rights Act 1996 provides that any evidence of pre-termination negotiations is inadmissible as evidence before a Tribunal in any unfair dismissal claim. These discussions are often described as ‘protected conversations’.
For example, you may offer a settlement agreement to an employee who has been the subject of previous disciplinary proceedings and whose behaviour has not improved. When the employee receives the offer he/she may immediately resign and seek to claim unfair constructive dismissal on the basis that the offer breached the implied term of mutual trust and confidence. If S111A applies the employee will not be able to refer to the discussion in which the offer was made before the Tribunal.
S111A protection only applies where the employee is complaining of ‘ordinary’ unfair dismissal. The protection of S111A does not apply to claims for automatic unfair dismissal e.g. where an employee alleges that dismissal occurred for a reason relating to their pregnancy or trade union membership. In addition, there is no S111A protection for any other claim e.g. breach of contract or discrimination.
ACAS have published a helpful guide on settlement agreements including template letters that can be used to initiate settlement discussions under S111A:-
The protection in S111A will not apply to its full extent where there is some improper behaviour on the part of the employer or the employee in relation to the settlement negotiations. This includes harassment, bullying and intimidation, including the use of offensive words or aggressive behaviour, criminal behaviour e.g. threat of physical assault, victimisation, discrimination and putting undue pressure on a party (e.g. not giving an employee a reasonable period of time to consider any proposed settlement offer, an employer saying before any form of disciplinary process has commenced that the employee will be dismissed if he/she rejects a settlement proposal, or an employee threatening to undermine an organisation’s public reputation if it does not sign a settlement agreement unless it is a whistleblowing case).
S111A supplements the ‘without prejudice’ rule which by contrast covers any type of claim and which provides that any discussion between an employee and employee entered into on a ‘without prejudice’ basis to settle an existing employment dispute cannot be disclosed in any subsequent legal proceedings.
If in doubt it is always recommended that you use the advice line and take employment law advice around any settlement discussions.
Young Persons And Compulsory Education.
We are employing a young person (i.e. someone who is not yet 18 years’ old) in England. In relation to the requirement for 280 guided learning hours, would ‘on the job’ training count for these purposes if there is no formal qualification at the end of it?
When it comes to the duty in England for a young person to participate in education and training, a person has such a duty if they:
- have ceased to be of compulsory school age
- have not reached the age of 18, and
- have not attained a ‘level three qualification’ (two A-levels, or various other broadly equivalent qualifications)
The duty may be satisfied by participating in appropriate full-time education or training, or training in accordance with a contract of apprenticeship or an apprenticeship agreementIt is also possible for 16 and 17-year-olds to comply with the duty while they are working. Where the individual is neither in full-time education or training nor training in an apprenticeship, the duty can instead be satisfied by being in ‘full time occupation’ and participating in ‘sufficient relevant training or education in each relevant period’.
Full time occupation
Being in ‘full-time occupation’ in this context means:
- working under a contract of employment, or as a self-employed person, or otherwise than for reward (i.e. as an unpaid volunteer), or as the holder of an office
- working at least 20 hours per week, not including any time during which they are participating in ‘actual guided learning’ (which constitute relevant training or education, and in which the young person participates each week during normal weekly working hours), and
- which contract or arrangement is, or is expected to be, of at least eight weeks’ duration
Relevant training or education
For those in full time occupation, the duty is to participate in relevant training and education, which is defined as training or education towards a ‘regulated qualification’ provided by a course or courses.
A regulated qualification is defined in section 130 of the Apprenticeships, Skills, Children and Learning Act 2009 and means, in general terms, in England: an academic or vocational qualification awarded or authenticated in England, which is not a foundation degree, a first degree or a degree at a higher level.
Sufficient relevant training or education
For those in full-time occupation, training or education will be deemed ‘sufficient’ if it amounts to 280 hours of guided learning per year, or the equivalent pro rata for shorter periods.
The person will be participating in ‘guided learning’ for the purpose of meeting the sufficiency requirement if they are:
- being taught or given instruction by a lecturer, tutor, supervisor or other appropriate provider of training or education, or
- otherwise participating in education or training under the immediate guidance or supervision of such a person
Time spent on unsupervised preparation or study, whether at home or otherwise, does not count for this purpose.
On the job training
To meet the requirement that the training must, in the first instance, be ‘relevant training or education’, the nature of the training must comply with the requirements of section 6 of the Education and Skills Act 2008 (ESA 2008).
If it does, then the sufficiency of that training over the relevant period will depend on the number of hours of guided learning the person has in that period, ie learning that is directly administered by a lecturer, tutor etc., or under the immediate supervision or guidance of such a person.
Whether there is any duty on the employer
The ESA 2008 places certain obligations on the employers of employees to whom the duty to participate in education and training applies, which are designed to facilitate compliance with ESA 2008.
However, save for one minor exception, the employer provisions have not yet been brought into force.
If implemented, the employer provisions would require employers (only in respect of individuals with employee status, not those with worker status) to:
- check before employing a new recruit to whom the duty applies that they had made appropriate arrangements for education or training
- allow (or in some cases allow to a reasonable extent) such an individual, once they had been taken on, to participate in the appropriate training or education
Until the employer provisions are brought into force, there is no obligation (in England) on an employer to facilitate a young employee’s participation in relevant education and training in compliance with the duty in ESA 2008, s 2.
This contrasts with the situation for relevant 16-18-year-olds in Wales and Scotland, who retain a right to paid time off for study and training.
Withdrawing an offer of Employment
“We made a verbal offer of employment, conditional on the individual satisfying certain pre-employment checks. Can we withdraw that offer before the pre-employment checks have been completed on grounds that the role has been withdrawn for operational reasons?”
The legal consequences of withdrawing an offer of employment will generally depend on the specific circumstances of the offer and the reasons for withdrawing it. The primary issue is likely to be whether, as a result of the offer being made, a contract of employment has been formed.
An offer of employment can be made orally or in writing, although, obviously, where an offer is made orally there is a risk the parties don’t agree on what the precise terms of the offer are/not all the terms of the offer have been fully identified, and that the parties proceed on different understandings.
In the normal course, however, once an offer of employment has been accepted and any applicable conditions have been met, a binding contract of employment is formed.
If, after the contract has been formed the employer then changes their mind, they will be unable to withdraw the offer and will instead have to terminate the employment contract by giving the employee their contractual notice, whether or not the employee has started work.
In practice this would usually mean making the employee a payment in lieu of notice.
An employee will generally need to have at least two years’ continuous employment to qualify for unfair dismissal protection, which rules out an unfair dismissal claim for most newly-engaged employees in this situation (unless the reason for terminating the contract was discriminatory or automatically unfair, in which case no qualifying period for bringing a claim may be required).
Usually where a conditional offer of employment is made in writing, the offer will be expressly stated to be ‘conditional on and subject to’ certain requirements being fulfilled.
It will be a question of fact in each case whether the offer of employment was conditional, and if so, whether the requirements listed in the conditions were fulfilled. As already mentioned, where the offer was made verbally it will be particularly important to establish the precise terms of the offer, and whether it was in fact ‘conditional on and subject to’ certain requirements being fulfilled.
Where a conditional offer of employment is made, a contract will not come into effect until the condition(s) have been met.
If the conditions have not been met, a prospective employer may be able to withdraw their offer without liability.
It may also be relevant to establish whether as part of the terms of the offer it was explicit that the employer would confirm the offer only once it was satisfied that the conditions had been fulfilled to its satisfaction.
Withdrawing an offer
Where an employer wishes to withdraw the offer of employment before certain pre-employment checks have been completed, i.e. effectively before it knows whether or not the individual will have fulfilled the conditions on which the offer was purportedly based, it will be necessary to establish whether or not:
- at the point the employer seeks to withdraw the offer, it is evident that a contract had already been formed (in which case, the employer will be in breach of contract if it proceeds to terminate the employment without complying with contractual notice provisions), and
- if the contract has not yet been formed, e.g. there has not been unconditional acceptance of the offer or conditions to which the offer was subject have not been satisfied, the employer may be able to withdraw the offer without liability.
Don’t forget, this advice is general in nature and will need to be tailored to any one particular situation. As an RMI member you have access to the RMI Legal advice line, as well as a number of industry experts for your assistance. Should you find yourself in the situation above, contact us at any stage for advice and assistance as appropriate.
Motor Industry Legal Services
Motor Industry Legal Services (MILS) provides fully comprehensive legal advice and representation to UK motor retailers for one annual fee. It is the only law firm in the UK which specialises in motor law and motor trade law. MILS currently advises over 1,000 individual businesses within the sector as well as the Retail Motor Industry Federation (RMI) and its members.