The Employment Appeals Tribunal ("EAT") has handed down its decision in Publicis Consultants v O'Farrell, which is authority for the proposition that the true construction of the meaning of the words used by an employer in a letter of dismissal in which it paid monies to an employee as an 'ex gratia payment', was a question of law.
An employee entitled to three months' notice was dismissed with four days notice. The letter of dismissal stated that she would receive an ex gratia payment equivalent to three months' salary. She brought a claim for breach of contract for failure to pay her salary for the three months' notice period. The employer argued that the ex gratia payment was actually made in respect of the notice pay. The tribunal found that the payment was truly ex gratia and that the employer was in breach of contract.
The Employment Appeal Tribunal applied the principles in Investors Compensation Scheme Ltd v West Bromwich Building Society, to be utilised in the interpretation of documents, and found that the money was unambiguously advanced as an ex gratia payment. If the letter had been ambiguously worded, it would have been appropriate to construe its wording against the employer, as the party who drafted the letter.
Kate Fretten, Employment Partner at Frettens, says "This case serves as a warning to employers that they should correctly identify payments made to employees when terminating their employment. The employer in this case obviously meant the ex gratia payment to cover the notice period and was probably trying to obtain a tax break for the employee, which came back on them."