Is a contract notice period legally binding? Employment solicitor Toby Pochron explains what notice periods are and their legal ramifications for employers.
In a current period of increased employment fluidity, notice periods have become a hot topic for employers. This article aims to deal with the practicalities of what a notice period means for employers and how to tackle tricky notice period situations.
What is a notice period?
The short answer to this is that a period of notice is usually required in order to lawfully terminate a contract of employment. It is a period of time which occurs after either the employer or employee has notified the other party that they intend to terminate the employment.
The purpose of a notice period is twofold:
- It provides employees with time in which to search for new employment while still benefiting from an income, and
- It provides employers with a grace period in which they can find a suitable candidate to fill the outgoing individual’s role
However, sometimes a notice period acts to get in the way of what each of the parties to the employment contract would want, ways to deal with these situations are detailed below.
Is there a minimum notice period?
There are elements that may dictate the length of a notice period:
- An employee’s contract of employment
- Reasonable notice
Statutory minimum notice
The starting point is that under the Employment Rights Act 1996 (ERA) there is a minimum period of notice. The current statutory minimum is:
- At least one week’s notice when the individual has been employed for one month or more but less than two years
- One week’s statutory notice for each year of continuous employment when the individual has been employed for more than two years but less than 12 years
- 12 weeks’ statutory notice when the individual has been employed for more than 12 years
The statutory minimum will not always be the notice period employers have to use. Employers have discretion to set a period of notice they deem reasonable in their contracts of employment. This period of notice may be longer than the statutory minimum, especially in roles which need an individual who is senior, qualified, or skilled and it would then take longer to satisfactorily fill their position. Yet, employers should also be wary to not set excessively long notice periods as they may act to deter employees from taking the role.
Employers, while they have discretion, cannot set the notice period lower than the statutory minimum as the ERA effectively imports this minimum figure into the contract of employment. If an employer attempts to do this, the courts will not enforce it unless the parties have waived their rights to such notice, which is highly uncommon in practice.
If the contract of employment is not for a fixed term and it does not include provision for the period of notice, then there is an implied term to give reasonable notice. A Tribunal would not just imply the statutory minimum but would consider the facts of the case and determine what they believe a reasonable period of notice. Typically, courts would imply a longer period than statutory notice.
Part time and casual employees
So long as a member of staff is classified as an employee, they will be entitled to a notice period regardless of the number of hours they work.
If the member of staff is a worker, then, while there is no legal obligation to provide a notice period, an employer can require one to ensure the employer gets that grace period to fill the role. Employers should be cautious to make sure that by providing their workers with a requirement to give notice they do not tip their workers into the realms of being an employee.
Is a notice period legally binding?
Yes, as there is a legal requirement to provide notice, the subsequent notice period is then legally binding. Failure to provide notice or serve the notice period could result in a breach of contract, which then provides the innocent party with a potential avenue to bring legal proceedings.
If the employee fails to comply with the requirements for a notice period, then the employer has the option to terminate the employment without any notice or any payment in lieu of notice.
Can an employee be terminated during the notice period?
Yes, just because an employee is working their notice period does not prevent a separate dismissal from occurring, brought about by either party. For example, if there is a summary dismissal in this time, perhaps due to gross misconduct, then there would be no requirement to provide any notice to the employee.
What to do if an employee is not working their notice period
As previously covered, a notice period is legally binding; therefore, if an employee decides they do not want to work their notice period they would be in breach of their contract.
There are several ways to approach a situation like this:
- Force the employee to work – there may be little merit in this as the employee has probably already checked out of the role
- Accept it, waive the notice period, and not pay the employee
- Seek legal action against the employee
If an employer has concerns over the potential damage an employee could do while working their notice period, then there are two routes which can be taken if provided for in the contract of employment:
- Employers can opt to put the outgoing employee on Garden leave. This would mean the employee is effectively suspended from their duties and has no access to the employer’s systems but remains on full pay.
- Employers can opt to pay the outgoing employee in lieu of all or part of their notice and the employee will then leave when the employer would want them to. This route can also be an option when both parties believe it would be beneficial despite no risk to the company.
What if an employee wants to extend the notice period?
Once valid notice has been given, it cannot be withdrawn by either party, it can only be shortened or extended by mutual consent. However, the employer can provide a second notice, which brings forward the date of termination.
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Written by Toby Pochron
Toby Pochron is a Senior Associate in the Freeths LLP Employment Law department. He was a Partner in the Employment Law department of Ironmonger Curtis.