UK Supreme Court Decision Limits Employers’ Power to Terminate Employment

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Today the Supreme Court has handed down its widely anticipated judgment in the case of Société Générale v. Geys. The decision clarifies the powers of employers to terminate the employment of employees without giving full notice, and will have far reaching implications.

Among the issues considered in the case was the apparently straightforward question: does a party to an employment contract have to accept the other party’s repudiatory breach to bring the contract to an end? It is a cornerstone of contract law that where one party is in repudiatory breach of contract (sometimes referred to as fundamental breach) the other “innocent” party has a choice. It can accept the breach and bring the contract to an end. Or it can affirm the contract, in which case the contract will continue. By a majority of four to one, the Supreme Court confirmed that employees have this choice where their employer is in repudiatory breach. In other words, it is up to the employee whether his employment comes to an end or, as was the case with Mr Geys (with important financial consequences), continues.

Lord Wilson commented, that to find otherwise, would cause “the law of England and Wales in relation to contracts of employment to set sail, unaccompanied, upon a journey for which [he could] discern no just purpose and [could] identify no final destination.”

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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