Employment law case of the week – trial periods and redundancies

Optical Express Ltd v Williams (EAT)

FACTS Ms Williams was employed by Boots as a manager from April 1978. She was responsible for two dental practices and a chiropody practice. In January 2005, the dental practices transferred to Optical Express under the Transfer of Undertakings (Protection of Employment) Regulations (TUPE), and Williams was informed by Optical Express that one of the dental practices would cease to exist.

She was offered a position as dual services manager in Bolton, managing a dental and an optical service. In August 2005, however, Optical Express decided to close the dental clinic in Bolton, and Williams’ position became redundant.

During consultation, she was offered a position as manager of the Bolton optical store at a protected salary, with a four-week trial period. Under s.138 of the Employment Rights Act 1996 (ERA), an employee who undertakes a trial period after being offered suitable alternative employment can unilaterally terminate the trial period and return to the position they would have been in but for the trial period. Williams, reluctantly, accepted the trial period. After it expired, she gave notice to terminate her employment, claiming that Optical Express had fundamentally breached her contract.

DECISION Although Williams had failed to give notice within the statutory trial period, she was nevertheless entitled to a common law trial period, which was not limited to four weeks.

The tribunal found that Optical Express was in fundamental breach of contract in imposing the alternative job on Williams, because it must have known that it was unsuitable. Williams had a reasonable period within which to decide whether to accept it, and she had resigned within a reasonable period.

The tribunal held that Williams had been constructively dismissed, and was entitled to a redundancy payment.

The Employment Appeal Tribunal (EAT) disagreed, saying that where there is an express offer and acceptance of a s.138 trial period, it is not possible for a common law trial period to run alongside it. It said the terms of s.138 are utterly clear. The tribunal was not entitled to conclude that the right to a statutory redundancy payment survived the operation of and non-compliance with a statutory trial period. Williams was, therefore, not entitled to a redundancy payment.

IMPLICATIONS This case highlights the importance for employers of being clear about whether any trial period offered in a redundancy situation is intended to operate under the statutory scheme provided for in s.138 ERA.

If the trial period operates under s.138, the employee must give notice within the trial period if they do not wish to continue in the new job to remain eligible for a redundancy payment. The parties may only agree to a trial period longer than four weeks in strictly limited circumstances and within the framework of the statutory scheme.

In practice, many employers do extend trial periods, as four weeks is generally not considered sufficient to try out a new job. However, if the trial period is extended beyond four weeks other than under the statutory scheme, the employee will only be entitled to a contractual redundancy payment (if any), and entitlement to the statutory redundancy payment will be lost.

Alan Chalmers is a partner at DLA Piper

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