societe-generale
It may seem a straightforward question since people are dismissed every working day for what is commonly referred to as “gross misconduct”, i.e. conduct which is so serious that it goes to the root of the contract and renders its continuation undesirable if not impossible.

However, what of the “innocent” employee? In my discussion about decision of the Court of Appeal in Société Générale London Branch v Geys in April 2011 I pointed out that, according to the Court of Appeal, Mr Geys’ employment was terminated on 18 December 2007 when Société Générale made a payment in lieu of notice to him, rather than 4 January 2008 when Société Générale confirmed in writing its intention to do so. The date was very important for Mr Geys because, relying on the earlier date, Société Générale did not have to pay significant bonuses which would have accrued prior to the later termination date.

I commented:

Société Générale had terminated his employment at a meeting on 29 November 2007, but Mr Geys had written back indicating that he was affirming his contract. Nonetheless, Société Générale made a payment in lieu of notice (in line with his contract) on 18 December 2007, and formally notified him of this by letter on 6 January 2008. The Court of Appeal overturned a previous ruling by the High Court and found that Mr Geys’ contract of employment ended on 18 December – thus he had no entitlement to the extra bonuses.

From Mr Geys’s point of view that, no doubt, was the most interesting (if disappointing) part of the judgment. However, of more general interest is what happened on 29 November 2007, because it highlights the conflict between “pure contract law” and statutory concepts of dismissal which underlie other claims such as unfair dismissal.

There was doubtless a repudiatory breach of contract by Société Générale – they made clear that Mr Geys’s no longer had a job. Yet such a unilateral breach cannot terminate a contract if – as happened here – the other party refuses to accept it. Hence the contract must continue, until ended in accordance with its provisions. However, Mr Geys’ status as an employee was clearly ended on that date – so for statutory purposes, it would be the Effective Date of Termination (EDT).

At first glance this is hard to get one’s head around – how can a contract of employment exist when (arguably) the essential mutuality of obligation has gone and one party is no longer an “employee”? Understandably, perhaps, the Court of Appeal wants the Supreme Court to consider whether an unaccepted repudiatory breach should, in fact, be able to terminate the contract.

However, what if the Supreme Court follows this route? The whole doctrine of constructive dismissal (which is a contractual concept which can be the basis for statutory unfair dismissal) relies on an employee promptly resigning in acceptance of a fundamental breach of contract by an employer. Where does it leave the employer’s defence that the employee affirmed the contract if the contract can be terminated by that unilateral breach alone? Will the EDT (so important for strict time limits) be at the date of resignation (as now) or the date of the breach?

The Supreme Court has now delivered its decision and found in favour of Mr Geys. Lady Justice Hale stated "the bank could easily have done things properly. But for whatever reason they did not do so." This was notwithstanding a clause which stated "Société Générale reserves the right to terminate your employment at any time with immediate effect by making a payment to you in lieu of notice". Why? Because the "elective" theory of termination applies to employment contracts, so that an innocent party must accept a repudiatory breach to end a contract.

This dismissal was without the proper notice and, as a result, Mr Geys is now in line for bonus payments that could exceed £16.3m. Incidentally, perhaps putting into proportion the hubristic debate concerning George Entwistle’s severance package from the BBC, this entitlement arose notwithstanding that Mr Gey had been with Société Générale for just two years.