Sick of no notice

Scotts Company (UK) Ltd v Budd [2003] IRLR 145

Mr Budd brought a claim for pay during his statutory notice period, despite being on long term sick absence and having exhausted his contractual entitlement to sick pay.

Mr Budd's original contract of employment provided for termination on three calendar months notice. A new staff handbook issued by his employer in 1997 provided that "staff are entitled to a minimum of four weeks notice from the company. The statutory minimum period of notice from the company is that after fours years' service, staff are entitled to one additional week's notice for each completed year of service up to a maximum of twelve weeks after twelve years' service."

In February 1998, Mr Budd went on sick leave. After one yearof absence , he exhausted his contractual entitlement to sick pay. On 10 May 2000, he received a letter from his employers giving notice that, in accordance with his contractual entitlement to thirteen weeks' notice of termination, his employment would terminate on 4th August 2000.

Mr Budd applied to the Tribunal, stating that he believed he was entitled to be paid during his notice period. Under s.88(1)(b) of the Employment Rights Act 1996, "If an employee has normal working hours under the contract of employment in force during the period of notice and during any part of those normal working hours...(b) the employee is incapable of work because of illness or injury the employer is liable to pay the employee...a sum not less than the amount of remuneration for that part of normal weekly hours calculated at the average hourly rate of remuneration produced by dividing a week's pay by the number of working hours".

The employer argued that these provisions did not apply. They relied on s.87(4) ERA 1996, which provided that s.88 to 91 ERA 1996 did not apply, if the notice given by an employer to terminate a contract was at least one week more than statutory notice. The employer argued that under the terms of Mr Budd's contract, he had been given thirteen weeks' notice and therefore where the employer had given one week more than the required statutory requirement, payment for the notice period did not apply.

The Employment Tribunal accepted the employer's interpretation, but found that the contractual provisions regarding notice had been varied in 1997. They found Mr Budd was contractually entitled to only twelve weeks' notice and therefore entitled to pay during the notice period.

The employers appealed. The EAT agreed that the right of the employee to be paid a week's pay of each week of the statutory minimum period of notice did not apply where contractual notice which the employer was required to give to terminate a contract was at least one week more than the statutory minimum notice. But the EAT decided that the Employment Tribunal had erred in deciding that the Applicant's contractual period of notice had been reduced by variation from thirteen weeks to twelve and therefore he was not entitled to pay during the notice period.

Although Mr Budd did not succeed, this decision highlights that where employees' contracts are terminated whilst on long term sick leave and they have exhausted their contractual entitlement to sick pay, they can still receive pay during their notice period, subject to them receiving statutory notice. This could offer an employee some financial package where there is little room to argue any compensation at all.