Veitch Penny LLP - Exeter | Crediton, Devon

Case

Scotts Company (UK) Limited v Budd - Employment Appeal Tribunal (March 2003)

Issues

(1) Contracts of Employment
(2) Terms of Employment
(3) Notice

Facts

This case considers the provisions of the Employment Rights Act 1996 (ERA) which state that an employee is entitled to be paid during his or her statutory notice period, save where the employee’s contract indicates that their contractual notice period is one week longer than the statutory minimum.

In this case, the Appellant Company and its predecessors had employed Mr Budd, the Respondent, since 1981. Whilst his original contract stated that 3 month's notice would be given upon termination, a staff handbook issued in 1997 stated that employees were entitled to a minimum of four weeks notice. The handbook then went on to say "The statutory minimum period of notice from the company is such after four year's service, staff are entitled to one additional week's notice for each completed year of service up to a maximum of twelve weeks after twelve year's service".

The Respondent went off work in February 1998 after he was certified as suffering from migraine and stress. His right to contractual sick pay was exhausted after one year. From that point on he remained in employment but he did not receive any pay.

Mr Budd’s employers wrote to him on in May 2000 (by which time he had been off work for two years) giving him notice that his employment would terminate on 4th August 2000, which according to the letter equated to thirteen week's notice. In actual fact the employee was given twelve weeks and two day's notice. No payments were made to him during this period of notice.

Mr Budd’s presented a complaint to the Employment Tribunal alleging he had been unfairly and wrongfully dismissed, and included a claim for breach of contract due to the employers’ failure to pay Mr Budd during this period of notice.

Both parties were in agreement that an employee who cannot work during the notice period through sickness is entitled to be paid a week's pay for each week of the period.

However the employers argued that it did not apply in Mr Budd's case, because according to the contract, Mr Budd was entitled to thirteen week's notice and not the statutory minimum of twelve. Consequently, as the notice was one week more than specified by the ERA, Mr Budd was not entitled to pay during his notice period.

The Tribunal found that this was the case but held that the staff handbook had varied Mr Budd’s contractual entitlement of thirteen week’s notice. The result was that he was entitled to twelve week's notice and therefore to pay during the statutory notice period. The employers were ordered to pay Mr Budd £7,717.85.

The employer appealed this decision to the Employment Appeal Tribunal.

Decision

The Employment Appeal Tribunal (EAT) found that the Employment Tribunal had erred in holding that the Applicant was entitled to pay in respect of the statutory notice period.

It was found that the Employment Tribunal had been incorrect in deciding that his contractual notice period had been reduced by variation from thirteen weeks to twelve. Therefore, his 13 weeks notice stood and the legislation did not apply to dis-entitle him to payment during the notice period. It was noted that the Tribunal had made the decision regarding the variation point without hearing argument on the point from either party. The decision was also made in the face of an express concession on behalf of the appellant that the notice period of thirteen weeks set out in the original contract prevailed.

The Employment Appeal Tribunal allowed the Appeal and dismissed the Applicant's claim for payment during the notice period.

Comments

This case bears out what Judge Burke QC admitted was a "curious result". From a practical point of view, it should be borne in mind that the contracts of employment must, from the outset, specify a notice period at least one week in excess of the statutory minimum notice in order for liability to pay during sickness to be avoided. Merely allowing an employee a week's more notice than they are contractually entitled to, would not trigger the provisions to apply in the right to pay.