Resignation and dismissal We have an employee who has resigned giving the required contractual notice. Can we dismiss the employee (on notice) part-way through their notice period? If an employee resigns on notice and the employer wishes to terminate the employment before the notice has expired (i.e. to unilaterally bring forward the date of termination), this will not ordinarily amount to a breach of contract by the employer, provided the employer complies with its obligations as to statutory and contractual notice (and other contractual obligations). The amount of notice (or payment in lieu of notice) the employer is required to give will depend on the employee’s length of service and contractual terms. These circumstances will ordinarily amount to a dismissal (such that unfair dismissal rights may be engaged if the employee has the required 2 years qualifying service), unless the employer terminates early by agreement with the employee. Even if the employee has under two years’ continuous employment, an employer should also consider whether the circumstances of dismissal give rise to any potential claim for discrimination in relation to any protected characteristics e.g. disability etc. However, according to the EAT in Marshall (Cambridge) v Hamblin [1994] IRLR 260 where an employee resigns and the employer brings forward the termination date by exercising its right in the contract of employment to make a contractual payment in lieu of notice, there is no dismissal. In Marshall , the employer had refused to allow the employee to continue working following their resignation and had exercised its discretion under the contract to pay wages (but not commission) in lieu of notice. The EAT held by a majority that where the employer has a contractual right to make a payment in lieu of notice, the employer can, by making the payment unilaterally, advance the effective date of termination without converting the resignation into a dismissal. This Marshall rule has been confirmed in another case of Fentem v Outform Emea [2022] EAT 36 . In Fentem , the employee resigned by giving nine months’ notice to take effect on 16 January 2020. On 19 December 2019, the employer invoked a clause in the contract enabling it, following the employee having resigned, to ‘terminate the [employee’s] employment forthwith’ by paying to them the salary, excluding bonuses, to which they would have been entitled in the remainder of the period of notice that had been given by them. As a result, the contract ended on 19 December 2019, instead of on 16 January 2020. The employment tribunal hearing the employee’s unfair dismissal claim relied on Marshall and concluded that the invocation, following a resignation, of a clause permitting the employer to terminate the contract upon making a prescribed payment calculated by reference to the unexpired period of the employee’s notice did not, as a matter of law, amount to a dismissal. The employee had not been dismissed and their unfair dismissal claim therefore failed. Conclusion When considering whether to dismiss with immediate effect with payment in lieu of notice (PILON) an employer should consider whether it has the contractual right (as set out in the contract of employment) to make a PILON and, if so, whether the precise terms of the contractual right enable the employer to make a payment in lieu of the full notice period only, or whether payment in lieu of any unexpired period of notice given by either the employer or the employee is permitted. As always, this advice is general in nature and will need to be tailored to any one situation. As an RMI member you have access to the RMI Legal advice line, as well as several industry experts for your assistance. Should you find yourself in the situation above, contact us at any stage for advice and assistance as appropriate.