Case of the week: Geys v Societe Generale, London Branch

Facts

The claimant, Raphael Geys, was employed as a managing director for fixed income sales at bank Societe Generale. On 29 November 2007, Geys was handed a letter that stated that the bank “has decided to terminate your employment with immediate effect”. He was then escorted from the building.

On 18 December 2007, the bank made a payment of approximately £32,000 directly into Geys’ bank account. The bank did not advise Geys in advance that the payment was to be made or what it constituted. However, Geys concluded that it was intended to be a payment in lieu of notice.

On 2 January 2008, Geys’ solicitors wrote to the bank’s solicitors stating that Geys had decided to affirm his contract of employment and reserved his position “in relation to the acceptance of these monies once we understand what they constitute”.

On 4 January 2008, the bank wrote to Geys stating that it had given notice to terminate his employment with immediate effect on 29 November 2007 and that his pay in lieu of notice had been credited to his bank account on 18 December 2007.

A dispute arose as to when Geys employment contract terminated, as this affected the amount of termination payment that he was owed under his contract with the bank. Geys argued that, having affirmed the contract on 2 January 2008, his contract ended on 29 February 2008, which was three months after notice was given. The bank’s case was that the contract terminated, if not on 29 November 2007, then on or shortly after 18 December when the bank made the payment in lieu of notice.

Decision

The High Court decided that, due to the bank’s failure to expressly inform Geys that it was summarily terminating his employment pursuant to the pay in lieu of notice clause, his employment contract did not end on 29 November when he was told he was summarily dismissed or on 18 December when the payment was made into his bank account. His employment contract did not terminate until 6 January 2008, the day on which Geys was deemed to have received the bank’s letter of 4 January confirming that it had exercised its contractual right to summarily dismiss and pay in lieu of notice.

The judge found that the bank’s actions on 29 November 2007 amounted to a repudiatory breach of Geys’ contract, since it did not have any justification for refusing to employ him. Geys had a choice whether to accept the repudiation or treat the contract as still in force. Therefore, the fact that the bank was exercising its contractual right to pay in lieu of notice had to be specifically communicated to Geys to terminate the contract.

The bank’s right to pay Geys in lieu of notice was set out in its staff handbook. Under his employment contract, Geys was entitled to three months’ notice on termination of his employment, but there was no right to pay in lieu.

It appeared that there was a conflict between the handbook and the contract. The High Court held that there was no conflict and that the right to three months’ notice was impliedly subject to other contractual rights. The pay in lieu of notice clause in the staff handbook qualified, rather than conflicted with, the contractual notice clause.

Implications

 If the decision is taken to terminate an employee’s employment summarily under a contractual pay in lieu of notice clause, it is important to ensure that this is expressly communicated to the employee at the time of dismissal. Be sure to make clear to the employee that the employer has a right to make a payment in lieu of notice, that the employer is exercising that right, and that the contract of employment will be terminated as a result.

In addition, ensure that the termination letter provides this information. A failure to provide such clarity means that the termination of the employee’s contract could be ineffective.

The other point to note is the importance of ensuring that contracts and handbooks do not contradict each other, or if they do, ensure it is clear which document will prevail. Needing to fall back on a court to determine such a conflict is far from ideal.

Rita Mehta, Solicitor, Thomas Eggar

Practical guidance from XpertHR on termination of contracts and payments in lieu of notice

Contractual rights on termination: The XpertHR employment law manual provides guidance for employers on the contractual issues that arise on termination of employment, including payments in lieu of notice. Model pay in lieu of notice contract clause: Use this model contract clause when drafting an employee’s contract or particulars of employment. How to write and amend an employee handbook: One of the problems in this case was that the employee’s contract of employment was not consistent with the employee’s staff handbook. The XpertHR “how to” on writing and amending an employee handbook provides a step-by-step guide to putting together a handbook.