Exercising a contractual payment in lieu of notice

Mark Minns, 14 June 2010

Payment in lieu of notice (PILON) clauses allow an employer to terminate an employee's contract of employment with immediate effect without breaching the contract.

Mr Geys worked for Société General, London Branch (the Bank). He was called into a meeting on 29th November 2007 during which he was given a letter that stated that his employment was to be immediately terminated and he was subsequently escorted from the building. A payment was made into Mr Geys’ bank account on 18th December 2007 but the Bank did not tell Mr Geys that such a payment would be made nor what the payment was in relation to. Mr Geys assumed that the payment was a pay in lieu of notice. In fact, it wasn’t until 4th January 2008 that the Bank made it clear (by letter) that it was exercising its contractual right to make a payment in lieu of notice, such payment having been made on 18th December 2007.

It was held by the High Court that Mr Geys’ employment continued until the date the Bank clearly communicated its decision to exercise its contractual right to make a payment in lieu of notice. The High Court found this to be the date on which Mr Geys would have received the letter sent by the Bank on 4th January 2008 (being 6th January 2008), not on 29th November 2007 during the meeting or on 18th December 2007 when the payment in lieu of notice was made.

This was particularly important to Mr Geys as a later termination date would significantly affect the financial settlement payable to him under his contract of employment.

Geys v Société General, London Branch [ 2010 ] EWHC 648