Employment contracts — termination or mutual separation?

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By Louise Corfield

Louise Corfield looks at what happens when decisions to terminate an employee overlap with a mutual separation.

It is well known that an employment contract can be brought to an end in a number of ways: by dismissal by the employer; notice given by the employee or an employee’s acceptance of a repudiatory breach; frustration; expiry; or mutual agreement. In cases where it is suggested that there was a mutual agreement, employment tribunals will always carefully scrutinise that suggestion, but they do not always get it right. The June 2013 Employment Appeal Tribunal (EAT) decision in Francis v Pertemps Recruitment (Appeal No: UKEATS/0003/13/BI) is the most recent high-profile example of a failure by an employment tribunal to do just that.

Most commonly, the scrutiny of a suggested mutual agreement or mutual separation arises in situations in which an employer has given an employee the choice to ‘leave before they are pushed’. The leading authority on this point is Sheffield v Oxford Controls Company [1979] IRLR 133 in which it was held that if an employee chooses to leave consensually, but only because of the threat that they will be dismissed if they do not leave, then this is no real choice at all. The causative link to the ending of the employment contract is the threat, and therefore despite the employee ‘choosing’ to leave it will be considered a termination. In Sheffield v Oxford Controls Company, Arnold J made clear, however, that if the threat is not causative and an employee consents to go and is genuinely willing to go on terms that have been agreed, perhaps because they are advantageous, then the threat is no longer causative and there will not be deemed to be a dismissal. Such a case would therefore be a consensual or mutual separation…

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