United’s u-turn – when can an employer retract a dismissal?

On Friday (31 January 2014) it was widely reported in the media that Championship side Leeds United had sacked their manager, Brian McDermott. By Monday, Mr McDermott was back in the hot seat and expressing his commitment to the club. Leaving the delicate nuances of that particular situation aside, it does give rise to an interesting employment law question – when can an employer retract a dismissal?

Of course, it will often be in the interest of both parties that a hasty dismissal is retracted by mutual agreement and the employee continues as if nothing has happened (as appears to be the case in Leeds, following the weekend’s events). There will, however, be occasions where an employee would like to rely on a dismissal that the employer wishes it could retract.

The general legal position is that unambiguous words of dismissal may be taken at face value and that, once given, notice of termination cannot be withdrawn unilaterally. However, it has also been established that if ‘special circumstances’ exist (typically when notice is given in the heat of the moment) the recipient of the notice is not entitled to take what is stated at face value. The extent of the ‘special circumstances’ exemption was considered by the Court of Appeal in the case of CF Capital Plc v Willoughby [2011] EWCA Civ 1115.

In that case, CF Capital PLC (‘CFC’) entered into discussions with Ms Willoughby about the possibility of her becoming self-employed as a way of avoiding redundancy. Ms Willoughby expressed an interest in the proposal, but asked for further details which were not forthcoming.

On 22 December 2008, CFC wrote to Ms Willoughby stating that her employment would terminate on 31 December 2008 and that, as of 1 January, she would be engaged under the terms of the new self-employed arrangement. Upon receipt of the letter, Ms Willoughby advised CFC that she would not be accepting the agreement and that she regarded herself as dismissed. CFC tried to retrieve the situation, but to no avail and Ms Willoughby claimed for unfair dismissal.

The claim was initially dismissed at the Employment Tribunal, with CFC successfully arguing that ‘special circumstances’ did apply. However the matter eventually went to the Court of Appeal, who disagreed.

The Court held that CFC had intended to terminate Ms Willoughby’s contract and its mistaken expectation that she would accept the proposed self-employment terms was not a ‘special circumstance’. It stated that the ‘special circumstances’ exception should not be characterised as an opportunity to withdraw a notice of resignation or dismissal unilaterally, as to do so would be inconsistent with the principle that notice cannot be unilaterally withdrawn.

This case confirms that it will only be in very rare circumstances that an employer is able to retract a dismissal without the employee’s agreement, so care must be taken before issuing notices of termination – not all employees will be as reasonable as Brian McDermott.