UK: Effective date of termination of employment – impact on incentive plans

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The Supreme Court confirm the timing of the effective date of termination (“EDT”) of employment on summary dismissal - a key date for vesting of rights under incentive plans.

The Supreme Court held that when employment is summarily terminated by letter the effective date of termination is the date on which the employee read the letter or had a reasonable opportunity to discover its contents.

In this case the employee was visiting a relative when the letter was received at her own home address.  Although she telephoned home she did not ask about her mail.  It was held that her EDT was when she returned home and actually read the letter.

Commentary

The effect of the case is that an employer cannot be sure of the EDT when he summarily dismisses an employee by letter.  Many incentive and benefit plans provide that rights under them cease to accrue or are forfeited on termination of employment.  It is therefore, key to know when that date arises.

Employers should consider arranging for summary dismissals to be communicated in person to employees in order to achieve certainty as to the date of dismissal and corresponding entitlement under any incentive and benefit plans.

Resources

Gisda Cyf v Barratt [2010] UKSC 41

For further information or to discuss the issues raised, please contact Guy Abbiss (guy.abbiss@abbisscadres.com) or Stephen Wright (stephen.wright@abbisscadres.com) on
+44 20 3051 5711.