Other Types of Termination of Contract

Termination by employee

An employee can unilaterally terminate the contract by resigning (with or without notice). The contract usually states how much notice should be given by the employee in order to terminate the contract and the form it should take.  As a minimum, s.86(2) ERA provides that an employee who has been continuously employed for 1 month or more is obliged to give at least one week’s notice. If the contract requires more notice, it is the longer notice which prevails.

Resignations and dismissals are mutually exclusive.  It is usually clear which party (employer or employee) has terminated the contract; however, there are occasionally circumstances when an employment tribunal may have to decide, such as constructive dismissals or where the employee has been pressured into resigning.

Termination by agreement

An employee and employer can agree to terminate the contract of employment. When this happens there is no dismissal.  Courts and tribunals are generally reluctant to find that contracts of employment have been terminated by agreement as it will deprive the employee of dismissal-dependant rights such as unfair dismissal and statutory redundancy pay.  They will scrutinise these agreements to find out whether the employee acted voluntarily and whether they exercised a genuine choice as to whether to leave or not.  If the employee’s agreement to leave was motivated by a threat of dismissal issued by the employer (“agree to leave or you’ll be fired”), there will have been a dismissal.

Termination by operation of law

A contract of employment may be terminated automatically by the occurrence of certain events.  In these circumstances there is no dismissal or resignation.  The most common example of this is frustration.  A contract of employment is said to have been ‘frustrated’ where it is brought to an end by an unforeseen event which makes performance of the contract impossible or radically different from what the parties intended. The most common frustrating events are death, illness and imprisonment.