Can employers unilaterally withdraw a written notice of termination issued to an employee? The Court of Appeal said in CF Capital plc v Willoughby that although there is an exception to the rule that once notice has been given it cannot be withdrawn except by consent, it would invariably only apply when the notice was given orally “in the heat of the moment”.

Basic facts

Because of the impact of the banking crisis, CF Capital (CFC) decided to cut its costs by reducing staff numbers in late 2008. To avoid making everyone redundant, it offered some staff (including Ms Willoughby) the chance to become self-employed.

After a meeting on 1 December, she said she was interested but wanted more details before committing herself. Her manager, however, thought she had agreed to the new arrangement and asked the HR manager to prepare the necessary paperwork.

On 22 December she received a letter saying that her existing employment would terminate from 31 December 2008 and her self-employed status would come into effect on 1 January 2009.

Having taken legal advice, Ms Willoughby told CFC on 5 January that on the basis of the letter, she was treating herself as having been dismissed. The firm apologised for any misunderstanding and said she could continue in employment. Ms Willougby did not respond but subsequently lodged claims for unfair and wrongful dismissal.

Tribunal and EAT decisions

The Tribunal said that “without more” the letter of 22 December would amount to a dismissal. However, it held there were “special circumstances” to take into account. Firstly, the manager had genuinely misunderstood the situation and a “reasonable person with that understanding” would have realised, on receiving the letter, that there had been a mistake and that the reference to termination was an error.

Secondly, as CFC withdrew the dismissal straight away once it realised its mistake, it was Ms Willoughby who had brought her employment to an end when she said she would not return to work. She was not, therefore, dismissed.

The EAT agreed with the Tribunal that the letter of 22 December amounted to a dismissal, but concluded that to decide whether there were “special circumstances” it should then have asked whether she was entitled to assume that the decision in the letter was a conscious, rational one.

Applying this test, the EAT said there was no reason for Ms Willougby to assume that the reference to termination was necessarily an error and as CFC did not make its change of heart clear until 5 January (after she had taken her decision on legal advice), she was entitled to take the dismissal at face value.

CFC appealed arguing, among other things, that the fact that the notice had been issued mistakenly was relevant as to whether there were “special circumstances”.

Court of Appeal decision

The Court of Appeal upheld the EAT’s decision, saying that a notice of resignation or dismissal has effect “according to the ordinary interpretation of its terms”. Once notice has been given, it cannot be withdrawn except by consent.

It did not consider the “special circumstances” exception to be a true exception to that rule because it would - almost inevitably - only arise in cases when notice has been given orally “in the heat of the moment by words that may quickly be regretted”.

The exception should be construed narrowly and give the person giving notice the chance to tell the person on the receiving end that they had never intended to give notice and their words were not in accordance with what they had meant.

If this was not the case the exception would be inconsistent with the principle that notice cannot be unilaterally withdrawn and the Court of Appeal did not think this was correct.

As that was the nature of the rule and the special circumstances exception, it did not apply in this case. Ms Willoughby had accepted the notice in a letter which was clear and unambiguous. In other words, it took effect according to its terms and, once given, CFC could not unilaterally withdraw it.