Employer could not retract mistaken dismissal
01/12/2011 in Employment
The Court of Appeal has held that an employer could not plead "special circumstances" to retract a letter of dismissal it had mistakenly sent to an employee.
The scenario of employers wanting to change their mind about a notice of dismissal after it has been issued is relatively common. This is a useful decision to be aware of as it provides a clear summary of the legal principles in this area.
The case concerned a company called CF Capital plc (“CFC”), which was suffering in the 2008 downturn and looking to make staff reductions. One proposal was to ask staff to consider becoming self employed. Ms Willoughby (“W”) was asked at a meeting on 1 December 2008 whether she would be interested in considering this. She expressed an interest and both during the meeting and in several subsequent phone conversations asked for more details.
No further information was forthcoming, but on 22 December she received a letter stating that her employment would terminate on 31 December when she moved to self-employed status. An agency agreement was attached.
W took legal advice and then informed CFC that she did not accept the agency agreement and considered her employment terminated. CFC, realising that it had wrongly thought she was happy to go down the self-employed route, desperately tried to backtrack in a series of phone calls and letters both to W and her solicitor. But W was having none of it and claimed unfair dismissal. The ensuing case found its way to the employment tribunal, the Employment Appeal Tribunal (EAT) and finally the Court of Appeal.
Under employment legislation, an employee is "dismissed" if their contract is "terminated by the employer". The general rule is that unambiguous words of dismissal may be taken at face value without the need for any analysis of the surrounding circumstances. However, previous cases have established that this rule can be displaced if "special circumstances" exist. The extent of this "special circumstances" exception was the central issue in this case.
The employment tribunal had sympathy for CFC and decided that "special circumstances" did apply. First, W left the meeting on 1 December with the belief that both she and her manager understood she was interested in the self-employed route. If she had been a reasonable person, she should have realised that the letter of 22 December was a mistake. Secondly, once CFC realised its mistake, it immediately tried to withdraw the dismissal. Since the termination was founded on a mistake and promptly withdrawn, there was no legal “dismissal”.
The EAT took a different view. It thought that the tribunal had failed to consider whether W was entitled to regard the letter as "a conscious, rational" decision. If the notion that CFC might have been mistaken was itself a "special circumstance", the EAT felt that the exception would overtake the rule. Employees must often think that employers are mistaken to dismiss them, but that did not mean that a letter of dismissal should not generally be taken at face value.
The Court of Appeal analysed the relevant legal principles in this way:
- The giving by an employer to an employee of a notice of dismissal - or indeed a notice of resignation when given by the employee - cannot be unilaterally retracted. It can only be withdrawn by consent.
- A reasonable recipient of the letter of 22 December would have no doubt as to what it meant or its legal effect. They might be surprised by its contents, but that did not mean the letter should be interpreted in a different way.
- The "special circumstances" exception is not strictly an "exception" at all. It is more "in the nature of a cautionary reminder to the recipient" that he must be satisfied the giver really did intend to give notice of dismissal or resignation. Its application will generally be in cases where the purported notice of dismissal (or resignation) has been given in the heat of the moment following an argument.
- The exception should not be characterised as an opportunity for unilateral retraction or withdrawal of a notice of resignation or dismissal. To do so would be to allow the exception to operate inconsistently with the principle that notice cannot be unilaterally retracted or withdrawn (see above).
On this basis, the Court agreed with the EAT that there was no basis upon which the "special circumstances" exception could apply in this case. CFC had intended to dismiss W by its letter of 22 December. Its giving of the notice may have been a mistake, but the mistake was the expectation that she would accept the proposed self-employment terms. It was not that W had agreed to be dismissed on 31 December, because this had never been discussed.
What this means in practice
The case confirms that the application of the "special circumstances" exception will be rare and that tribunals will be reluctant to extend its application beyond the scenario of a "heat of the moment" resignation or dismissal.
This is a salutary lesson to employers and employees alike of the need to stop and ensure that they truly intend to terminate the employment contract before purporting to do so. What is done cannot always be undone.
Willoughby v CF Capital plc  IRLR 985 (CA) – You can read the judgement here.
For more information on these issues please contact the Employment team.