Terminating the Contract - Contract of Employment

Before considering taking any termination/ dismissal action organisations should review their proposed course of action against the Procedure Check page.

Both parties to the employment contract may terminate it by giving due notice. Whilst there is then little to restrain the employee from terminating the contract, the employer must take account of unfair dismissal and discrimination legislation before proceeding. To enable an employee to bring a claim for unfair dismissal, 12 months continuous employment at the date of termination must usually have been completed. No service requirement applies where the case involves a claim of discrimination.

Termination by the Employee (Resignation)

The most common case of individuals terminating their employment contract is when they resign to take up alternative employment, employees are generally free to terminate their contracts of employment for any reason provided they give the due notice. If the employee leaves without giving due notice this constitutes breach of contract. However, such cases are rarely pursued in the courts by employers because of the difficulty in proving they have sustained a loss. Claims can only be successful where the cost of replacing the employee and making up for lost work is greater than the saving on salary made because the notice period has not been paid.

Constructive Dismissal

If an employee is given the option of "resign or be dismissed " and decides to resign, this resignation will normally be regarded as a dismissal by an industrial tribunal.

Termination by the Employer (Dismissal)

See dismissal pages

Termination Other than by Resignation or Dismissal

Contracts of employment can terminate for reasons other than resignation or dismissal by:

Breach of contract

Either party can breach the contract fundamentally, resulting in its termination. Where breach of contract occurs the party which suffers a loss as a result of this can claim compensation . In addition, where an employer fundamentally breaches a contract, an employee is entitled to resign and claim unfair constructive dismissal.

Gross misconduct

is a fundamental breach of contract by an employee, enabling an employer to summarily dismiss the individual.

Frustration of contract occurs where it becomes impossible for the performance of the contract to occur through no fault of either party e.g. death of the employee.

Frustration of contract may also be argued in other circumstances such as incapacitating illness or a custodial sentence. However, where the contract provides an alternative means of terminating a contract (e.g. dismissal under the Group's disciplinary procedure or termination due to incapability using the sickness management procedure), this should be used as industrial tribunals are reluctant to hold that a contract of employment has been frustrated.

Frustration of contract

Occurs where it becomes impossible for the performance of the contract to occur through no fault of either party e.g. death of the employee. Frustration of contract may also be argued in other circumstances such as incapacitating illness or a custodial sentence. However, where the contract provides an alternative means of terminating a contract (e.g. dismissal under the Group's disciplinary procedure or termination due to incapability using the sickness management procedure), this should be used as industrial tribunals are reluctant to hold that a contract of employment has been frustrated.

Mutual Agreement An employer and employee can mutually agree to terminate a contract. To be acceptable mutually agreed terminations must contain no suggestion of any pressure from the employer e.g. not "resign or be dismissed " . . Where a mutually agreed termination occurs without such pressure, an employee cannot subsequently claim unfair dismissal.

Before considering taking any action organisations should review their proposed course of action against the Procedure Check page.