Wording dismissal letters- a cautionary tale

 

HR professionals will be familiar with the importance of saying what you mean and meaning what you say in communications with employees.  With a large number of redundancy dismissals in local government at the moment, here is a cautionary tale over how the slack wording of a dismissal letter (probably for innocent reasons) can create problems.

 

The case concerned, Publicis Consultants Ltd v O'Farrell, was heard by the Employment Appeals Tribunal (EAT) at the end of May of this year.  The background to it was that a Mrs O’Farrell had worked for Publicis Consultants UK Ltd, but was made redundant in May 2009. Her contract provided for three months notice, but she was not asked to work this.  At the point of dismissal, she was paid her statutory redundancy pay and pay for untaken holiday entitlement. Her dismissal letter also said that she would receive an ex-gratia payment equivalent to three months’ salary, free of Tax and NI deductions.

 

On the basis of this wording in the letter, Mrs O’Farrell was able to claim successfully at an employment tribunal that the Publicis Consultants UK Ltd was in breach of contract by failing to pay her notice pay. 

 

Understandably, the employer appealed to the EAT, on the basis that the 3 months' "ex-gratia" was, in fact, the 3 months' notice pay provided for by her contract. 

 

This appeal was, however, unsuccessful, and the EAT ruled in Mrs O’Farrell’s favour.

 

The EAT said that the issue to be determined was, as a matter of law, how the dismissal letter should be interpreted. The wording implied clearly that three payments were to be made. The company was legally obliged to pay two of them, the third was a payment "made freely and not under obligation”, as the wordsex gratia clearly implied.   Therefore there was nothing in the language used in the dismissal letter to suggest that the ex-gratia payment was a notice payment which the employer was contractually obliged to make.  And there was no background information put forward by the company which changed this interpretation.

 

How the employer came to make this error is not clear, although it would appear that the use of the words ex gratia may have been an innocent but misguided attempt to help the employee by making the notice payment free of tax – it would have been liable to tax in the ordinary way, as the employee had a contractual right to it. 

 

The message for employers is to take care, whatever the motive, over the wording of dismissal letters, otherwise the unintended consequences could prove very costly.