Pay in lieu was payable to employee

An employee had the right to be paid his notice, despite the employer finding that he was guilty of gross misconduct after the payment was made

Mr Cavenagh was made redundant from his role as managing director of William Evans Limited (WEL).

WEL wrote to Cavenagh confirming that he would “receive all appropriate payments in lieu of any notice period”.

However, WEL subsequently discovered that Cavenagh had been guilty of gross misconduct. WEL believed that he had been in breach of his contract and so decided not to pay his six months’ pay in lieu of notice.

In the High Court, Cavenagh claimed that his pay in lieu was a debt due to him. Importantly, he did not deploy the usual argument of wrongful dismissal. The firm appealed.

In its appeal, WEL relied on the 19th century case of Boston Deep Sea Fishing and Ice Company v Ansell. However, the Court of Appeal decided that this case concerned an employee’s claim for damages for wrongful dismissal, whereas Cavenagh’s claim was for a debt due under a contractual term implemented by WEL.

The Court of Appeal noted that his employment was terminated in accordance with the terms of his contract, so he hadn’t been wrongfully dismissed. The court decided that by terminating Cavenagh’s employment by paying him in lieu of notice, the company was contractually required to meet that debt.

Cavenagh v William Evans Limited [2012] EWCA Civ 697