Capital Choice

Willoughby v CF Capital Ltd

It’s usually obvious when an employee has been dismissed, but what happens if the employer did not mean to dismiss the person and wants to retract it? In Willoughby v CF Capital Ltd, the Employment Appeal Tribunal (EAT) said that where the decision to dismiss was clearly conscious and rational it’s up to the employee to decide if her employment has come to an end.

Basic facts

By late 2008, CF Capital Ltd was suffering the effects of the banking crisis. To avoid redundancies, it asked members of the sales team if they would move from being directly employed to becoming self-employed.

Following a meeting between Ms Willoughby and her manager on 1 December 2008, she said she was interested in moving but that she would like more details before making a final decision. However, her manager thought she had agreed to switch. She then received a letter on 22 December terminating her employment and enclosing an agency agreement which would effect her move to self-employed status.

Ms Willoughby took advice and told her employer that the letter amounted to termination of her contract. The company apologised, saying there had been a misunderstanding, withdrawing the dismissal, and asking her to continue with her employment on the previous terms.

However, she refused and claimed unfair and wrongful dismissal; the company said she had resigned.

Tribunal decision

The tribunal said that the company’s letter of 22 December clearly amounted to a dismissal letter and if no more had been said between the parties, that’s how things would have stayed.

However, the tribunal said that there were “special circumstances” involved in this case - that the company genuinely believed she had agreed to go self-employed; and that it had withdrawn the “words of dismissal” as soon as it became aware of the misunderstanding. It held that Ms Willoughby had therefore resigned.

EAT decision

The EAT upheld her appeal, saying it was up to the employee to decide if her employment had come to an end since her employer had used unambiguous words of dismissal.

The fundamental question for tribunals was whether the person “to whom the words were addressed” was entitled to assume that this was a conscious, rational decision and that the words should therefore be taken at face value.

By contrast, the case law on “special circumstances” exceptions was limited and included only those situations when there was doubt as to whether there was a conscious, rational decision to dismiss, e.g. where things had been said in anger or the “heat of the moment” and had been quickly retracted.

In this case, the tribunal had failed to ask whether or not Ms Willoughby had been entitled to regard the contents of the letter as a conscious rational decision on the part of the company.

It added that, as a general rule, employees are entitled to take a letter (or words) of dismissal at face value (as are employers when faced with a letter of resignation). In this case, there was no error as to her dismissal. The error lay in the manager’s interpretation of what had been agreed at the meeting and there was no reason for Ms Willoughby to have known that he had misunderstood the situation.

The company had also taken its time in withdrawing the dismissal notice. In general terms, the EAT said it should be done in no more than a day or two and although the Christmas holidays had intervened, this was no excuse.

The EAT decided Ms Willoughby had been dismissed and remitted her claims to a fresh tribunal.