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Unfair dismissal: Employment was terminated by mutual consent

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By Ceri Fuller & Hilary Larter


Published 06 October 2023


The EAT has upheld an employment tribunal's decision that an employee's employment had terminated by mutual consent, and he had not been dismissed, even though the employer had referred to "dismissal" in a letter.


The facts


Mr Riley was employed by Direct Line Insurance Group plc. He was disabled under the Equality Act 2010 by reason of autistic spectrum disorder and mixed anxiety and moderate depression. He was absent from work for about three years.  Under Direct Line's private health insurance scheme, provided by UNUM, Mr Riley was paid 80% of his salary for much of the time he was on sick leave. 

A rehabilitation specialist recommended a four stage return to work plan, including an adjustment period before Mr Riley had to take any live calls.   Even after the adjustment period, working reduced hours, he felt unable to work because of his mental health, and he was signed off work again with ongoing anxiety and paranoia. 

Direct Line met with Mr Riley and discussed the option of ceasing his employment and instead receiving payments under the UNUM scheme.  Mr Riley agreed in principle, but he wanted to investigate the benefits in more detail.  After more communication, and when he had received confirmation that he would receive benefits through UNUM until state retirement age, he met again with Direct Line. Direct Line followed up with a letter telling Mr Riley that the outcome of the meeting was that he was dismissed on grounds of capability due to his ill health. 

Mr Riley claimed (amongst other things) that he had been unfairly dismissed. The tribunal dismissed all of his claims. It rejected his unfair dismissal claim on the ground that he had not been "dismissed": his employment had terminated by mutual consent, Mr Riley having proactively pursued the option of the UNUM scheme and agreed to the termination of his employment because he wanted to take advantage of the scheme.

Mr Riley appealed to the EAT, arguing (amongst other things) that the tribunal had wrongly rejected the unfair dismissal claim on the basis that his employment terminated by mutual consent.

Having reviewed and summarised the relevant case law, the EAT dismissed the appeal. The EAT held that there was ample evidence in this case that Mr Riley and Direct Line had mutually agreed to the termination of his employment, and that there was therefore no dismissal. In particular, the tribunal had found that Mr Riley had not been coerced or tricked, that he had participated in the discussions and had been given time and fully understood what he was doing. Although the letter, on its face, suggested an agreement to be dismissed, which is different from an agreement of mutual termination, the termination was agreed at the meeting, before the letter was written, and the tribunal rightly had regard to the substance not the form of words used when considering the effect of the letter. 


What does this mean for employers?


Employment tribunals will be cautious in reaching a decision that an employee has consented to the termination of their employment, looking (in particular) at whether the employee has been coerced, pressurised or tricked into agreeing to the termination. Direct Line was able to provide substantial written evidence of the basis of the termination of Mr Riley's employment, so it could show that the termination was genuinely by mutual consent.

Employers should confirm discussions proposing termination by mutual consent in writing, making clear that discussions are on the basis of mutual consent, and giving the employee time to ask questions and reach an informed decision. 

Matthew Riley -v- Direct Line Insurance Group PLC