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Termination of Employment

There are a number of ways to by which a contract of employment can be terminated. The way in which the contract is terminated will determine the legal claims that may arise between the employer and employee. The most common ways of terminating the contract are by:-

a) Resignation

b) Dismissal including constructive dismissal,

c) Mutual agreement,

d) Expiry of a fixed term,

e) “Frustration” of contract.

It is always important to specify the period of notice that the employee is required to give in the contract of employment. By doing this both the employer and employee will know what’s expected of them. In the absence of an agreed notice period, the courts and employment tribunal will imply a reasonable” period of notice. This is a vague term, and is not satisfactory for an employer trying to maintain certainty in running the business. It is useful for employers to request that any employee has an exit interview on resigning. This should help the employer to learn of any particular issues or problems in the workplace, and then correct them.

Dismissal may be with notice, and in cases of gross misconduct may be without notice. Naturally a claim of unfair dismissal can only be pursued if there has been a dismissal. Problems often arise when an employee leaves, apparently having resigned, and then subsequently claims to have been forced to leave, and presents a case of constructive dismissal. The onus will be on the former employee to show that he/she was actually constructively dismissed. Again this is another reason why employers should use exit interviews, as these should identify possible future claims of constructive dismissal. An employer and employee can agree to end the employment, on any date they agree to. The tribunals will scrutinise such agreements very carefully if the former employee claims to have been forced into the agreement, particularly if by a threat of dismissal.

The termination of employment may be agreed under a compromise agreement. There are certain legal formalities on the contents of a compromise agreement, but if these are met the employee (or former employee) will be precluded from pursuing a claim in the employment tribunal. A compromise agreement is therefore a very useful tool in ensuring that no tribunal claim can arise out of a situation that the employer believed was a termination of employment by mutual agreement. 

It is very risky for employers to assume that the employment of an individual has ever been terminated by agreement, particularly if this is not concluded by a compromise agreement. 

The termination of a fixed term contract of employment will happen automatically when the fixed period of the contract comes to an end. No further notice needs to be given.

There is a concept in contract law known as “frustration of contract”. Where the contract is frustrated there is no dismissal, and the contract comes to an end automatically. “Frustration” occurs when the performance of the contract becomes impossible from that which was originally expected by the employee and employer. It will arise where the liability to fulfil the contract is the fault of neither party. The two most common occasions when the employment comes to an end because of “frustration” is when the employee is imprisoned, or the ill-health of an employee prevents him/her from continuing the work under the contract.”Frustration” due to imprisonment is easy to see, as the imprisonment will prevent the employee being able to do his/her job. However, the employer would be foolish to think that any period of imprisonment would constitute “frustration”. The employment appeal tribunal has ruled that an employee that was effectively prevented from working for some time due to bail conditions did not have the employment end due to “frustration”, and the employer could have chosen to actually terminate the employment if it had so wished. The courts are very reluctant to accept an argument that a contract of employment was “frustrated” due to long term ill-health. Employers are expected to try to find alternative work, obtain medical information (particularly on prognosis), meat the employee to discuss the situation. There is also the risk that the employer would be in breach of the Disability Discrimination Act if it failed to make reasonable adjustments to assist the employee. The dismissal of an employee in this situation could amount to discrimination if the employee’s condition amounts to a disability and the employer hasn’t tried to make reasonable adjustments to the employee’s work or working patterns.


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