Is the company obliged to pay time in lieu if an employee resigns during a redundancy process and doesn’t complete the notice period at work? Martin Brewer, partner and employment law specialist at Mills and Reeve, and Esther Smith, partner at Thomas Eggar, explain.

The question:
An employee decides to end the trial period of alternative employment during the redundancy process and decides to leave with immediate effect. we require the employee to work his notice and whilst we would be willing to negotiate on this, we haven’t been given the opportunity to do so. He has left (has a new job elsewhere) and we reserve the right not to pay him his notice pay in lieu. He has now put a grievance in on grounds of discrimination of not paying his notice pay. Recently another employee left and he was not required to work his notice and therefore was paid in lieu. Any advise on how to proceed without risking the inevitable tribunal?! Many thanks.

Jo Robson

The answers:

Martin Brewer, partner and employment law specialist, Mills and Reeve
Jo, this is a little complex as it spans both contract law and redundancy law, so we’ll take it one step at a time.

First, assuming the employee was at risk of redundancy, it looks as though you found him an alternative job and agreed to the four week trial period.

Second, under the redundancy provisions of the Employment Rights Act 1996 (ERA), either an employer or an employee can end the statutory four week trial period on the basis that the job being tried was not suitable alternative employment.

ERA says that if the trial period is ended by the employee, for whatever reason, (and whether with or without notice) and as a result the employment is terminated, then the employee shall be regarded as dismissed ‘on the date on which his employment under the previous contract ended’ and the reason for the dismissal will be redundancy.

The consequences of this are as follows: If the employee ends the trial period by giving notice then he either works that notice and is paid or you as the employer can elect to pay him in lieu of notice (if you have a PILON (payments in lieu of notice) then the pay in lieu is taxable, if you don’t then the payment is damages). However, if the employee elects to leave without giving notice he is not entitled to be paid for any period after the end of the employment (unless you have a very odd contract which says something different). You are quite right to highlight the difference between an employee who gives notice and who you do not require to work (in which case you would owe pay in lieu) and this employee who made himself unavailable (in which case his entitlement to pay- whether pay in lieu or otherwise- stops when his employment stops).

Finally, there remains the question of redundancy pay. If the new job was suitable for the employee and his refusal to accept it unreasonable then under ERA he forfeits his redundancy pay.
Martin can be contacted at: martin.brewer@mills-reeve.com

Esther Smith, partner, Thomas Eggar
If the employee has walked out during the trial period you are in a good position to withhold the balance of the notice pay. You mention that the employee has raised discrimination but do not say on what grounds. Unless he can point to one of the protected grounds he cannot bring a claim of discrimination (for example he would need to show that the failure to pay his notice was less favourable treatment on the grounds of his gender, disability, age, race or some other protected ground). The fact that another employee was paid in lieu of notice should not cause you a major problem as I anticipate that the circumstances were very different and that the other employee did not walk out of a trial period.

You are never going to be able to avoid tribunals these days I am afraid, but you do seem to be in a good position. Also, if the sums due to him for the balance of the notice are relatively small it may make commercial sense to pay it to him, either in whole or in part, to avoid a claim.

Esther Smith is a partner in Thomas Eggar’s Employment Law Unit. For further information please visit Thomas Eggar

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