01 Nov 2023
By Caroline Carr, Partner & Accredited Specialist in Employment Law and Kimberley Tochel, Trainee Solicitor, BTO Solicitors LLP
Often employers and employees agree to part company by “mutual agreement”. Where employment is terminated by mutual agreement, it is critical for the employer to ensure that the termination is not referred to as a ‘dismissal’ which would make the employer vulnerable to an unfair dismissal claim.
This point was brought to light in the recent EAT case of Riley v Direct Line Insurance Group. The Claimant in this case had autism spectrum disorder and was absent from work due to this condition for several years. Medical evidence confirmed that he would never be able to return to work in this role.
The Claimant was given the opportunity to benefit from the employer’s permanent health insurance scheme offered by UNUM which allowed his salary payments to continue until retirement if his employment came to an end. The Claimant agreed to this proposal and a formal termination meeting was held. The employer sent the Claimant a letter the following day advising that he had been ‘dismissed’.
Following receipt of this letter, the Claimant brought claims to the Employment Tribunal for unfair and discriminatory dismissal and failure to make reasonable adjustments. The tribunal dismissed this claim, finding that the Claimant had not been dismissed and instead the termination of his employment was mutually agreed. The tribunal also dismissed the claim for failure to make reasonable adjustments as this was out of time.
The Claimant appealed this decision, but the EAT agreed with the initial tribunal decision and found, in particular, that the tribunal had not erred in finding that there was clear evidence of mutual termination. The fact that the termination was labelled as a ‘dismissal’ in the employer’s letter did not affect the conclusion, because the termination had been mutually agreed prior to the issue of this letter.
A termination which appears to be by mutual agreement could still result in a finding that a Claimant was unfairly dismissed if there has been coercion or pressure to agree to exit, for example, telling the employee that unless they agree to exit, they will be dismissed. However, in this case, the tribunal had gone to considerable lengths to consider this and concluded that the Claimant was not coerced and had freely participated in discussions to bring his employment to an end.
Despite this being a positive outcome for the company at the tribunal, it highlights a potential danger for employers where terminations by mutual agreement are wrongly labelled as dismissals.
Lessons to be learned
Employers should use clear, consistent and accurate language in correspondence to accurately reflect what has been agreed, in order to avoid the disruption and potential cost of disputes and tribunal proceedings.
If you require advice or further information in relation to unfair dismissal or how to successfully achieve terminations by mutual agreement, please contact us on:
Caroline Carr, Partner & Accredited Specialist in Employment Law:
cac@bto.co.uk / 0141 221 8012
Kimberley Tochel, Trainee Solicitor:
kto@bto.co.uk / 0141 221 8012
BTO Solicitors LLP
www.btoemploymentlaw.co.uk
