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Termination by stealth

19 May 2011 / Melanie Adams
Issue: 7466 / Categories: Features , LexisPSL , Employment
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Melanie Adams considers how to end an employee’s contract without telling him

Where a contract of employment contains an express contractual right to do so, an employer may lawfully terminate the contract without notice by making a payment in lieu of notice (PILON).

But must the employee be notified that a payment in lieu of notice is being made in order for a PILON clause to take effect and terminate the contract immediately? This was the main issue for resolution in Société Générale v Geys [2011] EWCA Civ 307, [2011] All ER (D) 350 (Mar).

The point was worth €2.5m to the claimant.

Facts of the case

He was employed by the defendant bank in its London branch. A major part of his remuneration package consisted of the bank’s discretionary bonus scheme and fixed income sales scheme.

His contract of employment contained the following clause: “[The bank] reserves the right to terminate your employment at any time with immediate effect by making a payment to you in lieu of notice (or, if notice

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