MR M FENTEM v OUTFORM EMEA LIMITED

The appeal concerned whether the invocation by an employer, after an employee had resigned on notice, of a contractual clause permitting the employer to terminate employment immediately by paying salary in lieu of the remainder of the employee's notice amounts to a "dismissal" for the purposes of unfair dismissal under section 95(1)(a) Employment Rights Act 1996. The tribunal concluded, following the EAT decision in Marshall (Cambridge) Limited v Hamblin, that the employer's use of such a contractual payment-right does not convert a resignation into a dismissal. The appellant accepted that Marshall v Hamblin establishes that legal proposition but argued the EAT should now depart from it as manifestly wrong. The tribunal and the EAT reviewed the principles in British Gas Trading v Lock governing when the EAT may depart from its own decisions and concluded that Marshall v Hamblin, while imperfectly reasoned, was not obviously or manifestly wrong and therefore remained binding. The appeal was dismissed.

Background and facts:

• The claimant resigned by letter dated 16 April 2019, giving nine months' notice to end employment on 16 January 2020. The employment contract included clause 19.5 allowing the employer, where the employee served notice, at any time during that notice to terminate employment forthwith by paying the salary (excluding bonuses) that would have been payable for the unexpired notice period.
• On 19 December 2019 the employer informed the claimant it was exercising clause 19.5, terminated his employment with immediate effect and paid salary in lieu for the remainder of the notice period. The tribunal found the effective date of termination was 19 December 2019.

Nature of the claim/application: The claimant brought an unfair dismissal claim, asserting that termination on 19 December 2019 was a dismissal by the employer.

Issues framed by the court:

1. Whether the termination effected on 19 December 2019 was a dismissal by the employer for the purposes of section 95(1)(a) Employment Rights Act 1996.
2. Whether the EAT should depart from its earlier decision in Marshall (Cambridge) Limited v Hamblin, which held that where, following an employee's resignation, the employer uses a contractual right to terminate by payment in lieu of the unexpired notice period, that does not amount to a dismissal.

Court's reasoning and conclusion:

• The EAT reiterated the statutory framework in section 95 and explained that the key question is whether the contract was "terminated by the employer". Contract-law distinctions between modes of termination are relevant.
• The tribunal was bound by Marshall v Hamblin unless that decision fell within recognised exceptions identified in British Gas Trading v Lock, such as being per incuriam, inconsistent with other EAT decisions, or manifestly wrong.
• The appellant argued Marshall was per incuriam or manifestly wrong. The EAT examined those arguments, considered related authorities and the reasoning in Marshall. Although the majority's reasoning in Marshall appeared problematic in places, the EAT concluded that the legal proposition emerging from Marshall — that an employer can, by contractually-prescribed payment, bring forward the effective date of a resignation without converting it into a dismissal — was not obviously or manifestly wrong.
• Because the EAT could not say Marshall was manifestly wrong and no other Lock exception applied, the EAT declined to depart from Marshall and dismissed the appeal. The court noted that resolution of the underlying doctrinal dispute should be left to the Court of Appeal.

The appeal is dismissed. The Employment Appeal Tribunal concluded it was bound by the earlier EAT decision in Marshall (Cambridge) Limited v Hamblin because, although that decision's reasoning had shortcomings, its legal proposition — that where an employee has resigned and the employer invokes a contractual clause to terminate earlier by paying salary in lieu of the unexpired notice, the termination does not amount to a dismissal — was not manifestly wrong under the Lock principles for departing from EAT precedent.

Employment Tribunal (first instance) determined the claimant's unfair dismissal claim and dismissed it; appeal to the Employment Appeal Tribunal resulting in this judgment [2022] EAT 36.