All UK employment contracts ‘will have to change’ after NHS worker’s Supreme Court win

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The Supreme Court has handed down its long-awaited landmark ruling in the appeal of Newcastle upon Tyne Hospitals NHS Foundation Trust v Haywood, that notice of termination takes effect neither when the termination letter is posted by the employer, nor when it is put through the employee’s front door – but when the employee actually reads it.

The Supreme Court found in favour of Sandi Haywood, an NHS worker whose managers sent her notification that her role was redundant while she was on holiday. It centred on the timing of her dismissal and whether the official notice fell before or after her 50th birthday.

By a majority of three to two, the Supreme Court upheld the decision of the Court of Appeal of May 2017, which held that notices to terminate employment take effect only when the employee reads the notice – not when it is sent by the employer.

The judgment, published yesterday (25 April), has far-reaching consequences for both employers and employees as it looks set to trigger changes “to all employment contracts in the UK”, said a spokesperson for Irwin Mitchell, Haywood’s lawyers.

The ruling means that in the absence of an express clause in a contract outlining when notice is deemed to be given and take effect, a term will be implied that notice will take effect from when it has been received and read by the employee, having first had a reasonable opportunity to do so.

Lady Hale, with whom Lord Wilson and Lady Black agreed, gave the main judgment dismissing the Trust’s appeal and further analysis of the case law. Lord Briggs gave the dissenting judgment, agreed by Lord Lloyd-Jones.

The case was brought by Haywood, who was dismissed by reason of redundancy by her employer, Newcastle upon Tyne Hospitals NHS Foundation Trust. She had worked for the NHS for more than 30 years as an associate director of business development for Newcastle and North Tyneside Primary Care Trusts.

Her employment contract provided that she was entitled to a minimum 12-week notice period, but was silent about how that notice should be communicated.

On 13 April 2011, Haywood was informed that her role was at risk of redundancy following the merger of two NHS bodies. She accepted this but requested that a final decision about this should not be made in her absence and explained that she would be on holiday from 19 April 2011 – a holiday which the Trust knew about and had approved.

On 20 April 2011, the Trust sent a letter giving written notice of termination by recorded delivery to her home address, aware that she was away on holiday at the time.

The Trust incorrectly said that it had given her notice by a letter dated 21 April, misdated because it was sent on 20 April to her home address by recorded delivery and by normal post. A copy was also emailed to her husband’s email address.

The impact of this was that if her employment was to terminate before her 50th birthday, she would receive a reduced pension.

As Haywood had told her employer that she would be on holiday and would return around 26 April, there was no one at home when the recorded delivery letter arrived and it could not be delivered on 21 April.

The letter was collected from the local sorting office by her father-in-law on 26 April and left by him in her house that day. Haywood returned from holiday on 27 April and it was not until later that day that she read the letter.

The Trust argued that notice was effectively communicated on 20 April, 12 weeks after the letter was sent, meaning her 12-week notice period expired before her 50th birthday, which was on 20 July.

Haywood maintained that notice of her termination was not effectively communicated until she read the letter on 27 April, meaning her termination date would be after her 50th birthday.

The High Court and the Court of Appeal by a majority upheld her case that the notice period only commenced on 27 April. The Court of Appeal had stated that the effective date is when the employee reads the letter giving notice.

The Supreme Court agreed. “On the unusual facts of this case, the date on which the 12-week notice period started to run was highly material. If it commenced on 27 April 2011, it expired on 20 July 2011 – the date of Mrs Haywood’s 50th birthday – and Mrs Haywood would be entitled to claim a non-actuarially reduced early retirement pension,” the court statement read.

In the absence of an express contractual provision, the court had to determine the implied contractual term as to when notice took effect. The Trust argued that a common law rule, derived from landlord and tenant cases, provided that notice was given when the letter was delivered to the recipient’s address.

Haywood relied on the approach of the Employment Appeal Tribunal (EAT) in employment cases that notice only took effect when it had actually been received by the employee and the employee had either read or had a reasonable opportunity to read it. The Supreme Court majority upheld the EAT approach was correct.

Receipt of the notice was always required, and that should be by a person authorised to receive it.

The ruling is important for employers and employees as the termination date can be decisive in determining an employee’s entitlement to a bonus or other contractual payment, insurance or employee benefits, or the statutory right to claim unfair dismissal and/or redundancy pay, and increased pension rights.

Kate Brearley, employment partner at Stephenson Harwood, told People Management that the majority of the Supreme Court held that there was no clear and universal principle under common law that service of notice occurs when notice is delivered to the recipient’s address.

“In a judgment favourable to employees, the majority of the Supreme Court has ruled that the same principles apply to determine when notice takes effect both in a pure contractual context and in the case of statutory employment claims.”

She added that the decision will “inevitably prompt employers to review their contracts and, for those who have not already done so, to take advantage of the clear steer from the Supreme Court that careful drafting can provide greater certainty of when the notices they give take effect.”

According to Irwin Mitchell, Haywood was awarded just under £400,000 by the Court of Appeal in past and future losses although pending the outcome of the Supreme Court hearing, no monies have yet been received. The case was heard at The Supreme Court on 20 November 2017.

As the judgment resulted in a new term implied into every employment contract in the UK, Irwin Mitchell said that “in practice, if an employer makes an employee redundant via a letter, the employee must have a reasonable opportunity to read it before notice is officially given.”

Jane Anderson, a senior associate at Irwin Mitchell, who represented Haywood, said: “This is a significant case, particularly as it provides a definitive answer to the question of when does the notice period start if an employee is dismissed on written notice posted to them as opposed to communicated to them in person.”

Caspar Glyn QC, employment barrister from Cloisters, described the case as legally significant in regard to the new implied term.

Another notable feature of the case was the use of alternative funding arrangements to represent private individuals in relation to large organisations. Haywood was funded by legal expenses insurance in her first instance claim, then through a conditional fee arrangement with an after-the-event insurance policy for the Court of Appeal and Supreme Court.

“Without that, she would not have had the ability to resist the two appeals made against her and the original judgment”, Anderson said.

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