Mutual termination

On occasion, the employer and employee both agree to terminate the employment, often in return for an early pension or settlement of a claim. In these cases, there is no dismissal and the employee cannot subsequently bring a claim of unfair dismissal.

In the case of Meaker v Cyxtera Technology UK Ltd [2023] EAT 17, the employer argued that there was a mutual termination of employment but the EAT held that there was a dismissal. A “without prejudice” letter enclosing a settlement agreement and informing the employee that his employment was to end by mutual agreement was misleading and the letter was a valid notice of dismissal. It gave a clear date for the last day of employment, the amounts that would be paid, the date for payment, and the fact that a P45 would follow. This was sufficiently clear to terminate employment.

By contrast, in Riley v Direct Line Insurance Group plc 2023 EAT 118, there was no “dismissal” when the employee agreed to the terms of a permanent health insurance scheme, which resulted in his employment being terminated.