Employment law- Notice
What is the minimum notice that you must receive from your employer?
Notice is usually specifically agreed with your employer, and this would usually be part of the terms of your contract of employment. There are, however, statutory minimum notice periods which apply in any event- regardless of whether your contract of employment provides for a lower notice period. These minimum periods are based on the time that you have worked with your present employer:
- if you have worked between 1 month and 2 years – 1 week’s notice is required from your employer;
- if you have worked between 2 and 12 years – you are entitled to 1 week for every year worked up to a maximum of 12 weeks.
For example, if you have worked for 8 years, in the absence of any contractual provision, or where your contract provides for less than the statutory minimum, you would be entitled to 8 weeks notice.
Don’t forget that the above minimum periods are just that- a “minimum”. If your employment contract provides for a notice period higher than the minimum, then you should be entitled to receive that notice at the higher period.
An Employment Tribunal can order that you should be entitled to more than 12 weeks notice because it is “reasonable” in that particular industry. For example, it may be that for senior managers in a certain sector, the usual notice periods are 6 months. It is rare, however, for a Tribunal to make such a finding.
If you are not paid in accordance with your statutory minimum notice period or contractual notice period, you may have a claim for breach of contract, otherwise known as “wrongful dismissal“.
What is the minimum notice that you must give to your employer?
Usually, the contract of employment will specify what notice period you should give if you wish to resign your employment. This can be varied by agreement.
If the contract is silent, the statutory minimum period of notice where you have been employed one month or more is 1 week. You can give notice verbally or preferably in writing (an email would suffice). This is to stop any subsequent dispute as to whether notice was, in fact, given.
A much longer notice period may, however, may be implied if it is reasonable in all the circumstances (i.e. what is normal for a person of that seniority and in the industry).
What are my payment rights during my notice period?
You are entitled to receive your normal pay during your notice period, as set out in your contract of employment. This includes any time that you are off sick (assuming you are entitled to sick pay), on holiday or maternity pay. You are also entitled to be paid when you are available for work, but your employer does not provide you with any.
What if I wish to leave without giving notice, or I want to give less than my full contractual notice?
If you wish to leave without giving full notice, this will put you in breach of contract- unless you have your employer’s consent. Having said that, there are limits on what your employer can do about it. You cannot be forced to work as a matter of law.
In certain circumstances, an employer may be able to obtain an injunction to stop you from working for your new employer during the full (or balance) of your notice period, however this is rare and only likely to be worthwhile against senior executives. Your old employer would have to show that your new employer is a direct competitor, and that there is a “legitimate business interest” that they need to protect- this is not always an easy task.
You may also be sued by your employer for the additional costs arising from your breach of contract. This could happen, for example, if your employer incurs a higher cost of replacement staff for the balance of your notice period. In the most serious cases, a claim could further be made for lost business or sales arising from your breach. Again, such claims are very rare and likely to be brought against senior personnel only.
The most likely consequence of you giving less than your full contractual notice, is that your employer will refuse to provide a reference should you need one in the future, or that any reference they do provide will be reflected by their experience of being left in the lurch.This could put at risk your future employment, unless your new employer understands and accepts why you took the risk to leave early (indeed an early starting date may have been the reason why you wanted to give short notice in the first place).
It may also be, if you give short notice, that you will be considered a “bad leaver” for the purposes of any share awards or incentive plans. This could adversely affect your right to receive these benefits, as the plans may be expressed to be conditional on compliance of your employment contract.
What are my rights to still receive salary and benefits during my notice period?
If you are working your notice, or placed on garden leave (that is, not being required to come into work during your notice period), you would usually be entitled to receive normal pay and benefits during your notice period- because you are still employed for this period. This would include such benefits us private health insurance,and pension contributions. If your employer decides to pay you in lieu of notice (known as “PILON”), then you may not receive all your benefits as your contract comes to an end immediately, depending on what your contract of employment states. Please see below for further information.
What is Pay in Lieu of Notice (or “PILON”)?
This is where you are paid for your notice without having to work it and is often referred to as “PILON” (pay in lieu of notice).
More often than not, there is a PILON clause in your contract of employment, which gives your employer a discretion to terminate your employment immediately pay you in lieu of notice- in whole or in part.
Most contracts of employment expressly provide that there is no entitlement to be paid for benefits such as car allowance, pension, or private health insurance where you are paid in lieu of notice. In other words, you will receive just your base salary. If the contract is silent on this point, however, it is definitely arguable that you should also be paid your benefits for this period. A payment of your benefits should also be paid when your employer has not reserved the right pay you in lieu of notice at all.
If you are dismissed by your employer without notice, and you do not have a PILON clause, this is a breach of contract (even if full compensation for the notice period is paid). This means any post-termination restrictions in your contract of employment will no longer apply.
What are my rights if my employer pays PILON, but there is no PILON clause in my contract of employment?
Where this happens, it is technically a breach of contract by your employer. Such a payment would therefore represent “damages for breach of contract” and your employer should in these circumstances include payment of other benefits that would have accrued during the notice period had you worked it. Some examples would be pension payments, private health cover, car allowance and holiday pay.
If you have restrictive covenants in your contract of employment, you are usually released from such covenants where your employer pays you in lieu of notice without having reserved the right in your contract. You should, if possible, take proper legal advice first before relying on this as you will need to be seen to accept and acknowledge your employer’s breach to then be released from your restrictive covenants.
Are you still entitled to receive your bonus once you give notice?
When does your notice period start?
Unless your contract of employment states otherwise, notice can normally be given on any day, and the notice period runs from the start of the following day. So, for example, if the notice is given on Monday, the period of notice will begin on the Tuesday, and continue until the end of the relevant Monday (say the following Monday if you are only give a week’s notice).
What if I am not around to receive my notice?
Your notice is only deemed effective when it is read by you, or you had a reasonable opportunity to read it. If it was sent in the post, for example, whilst you were on holiday, then it will be deemed effective from the date you returned and had the first opportunity to read it.
Am I entitled to take my holiday during my notice period?
Yes, you can, but only if your employer agrees to this. If they don’t, it should be for a valid business reason.
Can my employer force me to take my outstanding holiday during my notice period?
Your employer has the right to ensure that you use up your annual leave during your notice period. There would need to be a provision in your contract of employment for your employer to insist that you take your holidays during your notice period without condition.
If there is no such provision, your employer should give you adequate advanced notice, which is at least double the number of leave days they want you to take. For example, if you have 4 days of holiday remaining, you must be given at least 8 days’ notice to take those days as holidays.
What about stock options, restricted stock and deferred compensation?
Your employment contract should set out how long you need to have to stay with your employer to realise your stock options. If you have already exercised the options, these cannot usually be taken away from you. If you have not exercised them, it may be possible to negotiate whether you can still realise any of the value of those options.
If you leave employment prior to the date your Restricted Stock Units vest or are fully distributed, then you often forfeit your units. You do need to check your employer’s plan for details of what the position may be, however. This is because there may still be an opportunity to make a claim for the stock where your employer is in breach of contract in paying you in lieu of notice when your contract doesn’t allow them to do so (this is known as wrongful dismissal). This would not apply if your stock plan is with a different party to your actual employer.
You should also check what the position is regarding any deferred bonus, especially in relation to the unvested value, when it will vest and when the deferred payments will be made.
What are your rights to notice whilst you are on sick leave?
What is garden leave?
You may be asked not to attend the workplace during your notice period and not permitted to work, even though you continue to be paid. This is known as “garden leave” as you are generally expected to stay at home, (although this does not mean that you have to be house-bound).
Where you are placed on garden leave, your contract of employment remains fully alive in all respects- other than the fact that you do not need to attend or carry out work. You are still entitled to receive full pay and benefits,. At the same time, however:-
- you may be required to take any outstanding annual holiday;
- your employer may request that you refrain from contacting any clients, customers, suppliers or contacts of the employer without their prior consent;
- you will prohibited from working elsewhere or commencing employment with a new employer or on a self-employed basis (unless your employer provides its consent).
Garden leave is something many employers are keen on, especially where you are a senior executive with important client contacts, knowledge of a strategic market, and confidential information. The aim of garden leave is to keep you out of the market place long enough for any information you have to go out of date, or to enable your successor to establish themselves (particularly with customers), so as to protect goodwill. At the same time, you are expected to be on standby in case your employer still requires all or part of your services or input for the garden leave period.
If you have post termination restrictive covenants in your contract of employment or service agreement, is common practice for employers to offset any time you spend on garden leave against the length of time of those covenants. For example, if you are placed on garden leave during your 3 month notice period, and you had restrictive covenants which prohibited you from approaching past clients for six months after you have left your employer’s business, the restrictive covenants would be reduced by the 3 months that you had already spent on garden leave.
What happens if I breach my garden leave clause?
If you breach your garden leave clause, for example by working for a competitor during the garden leave period, your employer could decide to apply for an injunction to prevent you from working. This is more likely to happen where it can be shown your actions will damage your employer’s business, and that compensation would not be a sufficient remedy (for example, where you are disclosing confidential information to your new employer).
It is rare for a court to grant such an injunction. The more likely scenario is that a court would award damages to your employer to compensate them for the loss caused by your breach-as opposed to stopping you working.