August 27, 2007
No Implied PILON Term in Scots Employment Contracts
Scotland's highest court has held that there is no implied term in an employment contract that gives the employer a right to terminate the contract early upon what is usually called a "Payment in Lieu of Notice."
The case, Morrish v. NTL Group Ltd., involved a contract, originally signed in 1983, which provided that the employer could terminate the contract on 12 months' notice. In 2005, the employer decided the job was redundant and terminated the employee without giving the proper notice. The employer argued that there was no breach, since the notice provision gave it an implied right to terminate the agreement upon paying the pro-rated share of the employee's compensation for the notice period.
The Inner House of the Court of Session -- equivalent to England's Court of Appeal -- disagreed. In an opinion by Lord Nimmo Smith, the court found that the notice provision did not create any implied term related to damages. Failure to give the notice was a breach, and since the contract was breached, the employee had a right to pursue a damages remedy.
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