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Payment was a gift, not notice pay

In Publicis Consultants UK Ltd v O’Farrell the EAT held that the wording used in a dismissal letter referring to an ‘ex gratia’ payment did not suggest or imply that it was a payment in lieu of notice owed to the employee.

Ms O’Farrell was made redundant and received a severance package made up of an ex-gratia payment, statutory redundancy pay and accrued holiday pay. The wording of the ex-gratia payment element read “Ex gratia Payment – You will receive an ex gratia payment equivalent to three months’ salary. This payment amounts to £20,625.” Her notice period was 3 months.

The tribunal, in finding that Ms O’Farrell’s dismissal was unfair, also allowed her claim for breach of contract by failing to pay her notice pay. The decided that the ex-gratia payment was a gift and was not a payment made on account of any legal obligation. In what should serve as a warning about the careful drafting of dismissal letters, the EAT agreed with the tribunal. An ‘ordinary reader’ would find nothing in the language used which suggested that the company was ‘obliged’ to make the payment as the term ‘ex-gratia’ means given as a gift, favour, or gesture of goodwill, rather than because it is owed. If the amount was a payment in lieu of notice then that should have been clearly stated.

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