A look 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 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.

The case of Frances v Pertemps also involved a choice being put to the Claimant, but a different kind of choice. The Claimant was employed by the Respondent employment agency, which placed him in work with a specific client. His contract specified the client and the site and did not, rather unusually, allow for him to be moved. After over two years of the Claimant working for that client they decided that they no longer needed to use the agency’s services and therefore the Claimant could no longer be placed there by the agency. The Claimant was given a choice of two options by his employer; either he could have two weeks notice and the agency would continue to look for work for him elsewhere, or he could have two weeks notice and a redundancy payment.

The Claimant initially chose the first option, and then later changed his mind and chose the second option. After each choice he received a letter confirming his two weeks notice pay and after the second choice he was given the opportunity to ‘appeal the decision to terminate his employment’. Despite this the employer still argued, and the ET found, that the Claimant had chosen to leave rather than accept the offer of the agency looking for new work, and therefore there had been a mutual separation.

The EAT reversed this decision, finding that the offer on behalf of the agency to look for alternative work would have amounted to offering a new contract because his contract of employment only provided for him to work on the original site. It therefore held that the original contract of employment to work for the specified client was terminated and he was accordingly dismissed. The Claimant was given a choice, but his choice did not relate to the termination or end of his original contract, his choice only extended to what he wanted to do following that termination. The EAT drew a clear distinction between the definition of dismissal in s95 Employment Rights Act 1996, which involves the termination of the contract under which the individual is employed, and the entitlement to a redundancy payment under s138, which is dependent upon the employment relationship coming to an end. The focus for determining whether there has been a termination or dismissal is not on whether the individual remains in employment with the employer, but whether the specific contract is terminated. It is therefore not enough that the employee is given a choice; the choice must be a relevant choice.

In this case a choice of whether to remain in an employment relationship with the employer was not enough to give rise to a mutual separation. The ET should have undertaken a more careful examination of the choice, because if the choice does not relate to whether the contract is terminated (and in this case it couldn’t have done) then there will be a termination by the employer.

Frances v Pertemps therefore deals with a choice being put to an employee that is different to the more usual threat of dismissal but the option to leave, although not perhaps all that rare in practice. The EAT found that it was effectively a choice between two options that involved dismissal, just on different terms. Such circumstances can only mean that the employer offering the choice intends to dismiss. There is no choice on the key issue of dismissal, and therefore it must be classified as a dismissal rather than a consensual parting or separation.