Ms. O'Farrell worked for Publicis Consultants UK Ltd in the post of Director. Her contract provided for three months' notice of termination by either party. She was informed of her redundancy by letter of 14 May 2009, the effective date of termination being the day after. She was paid to 18th May and was provided with statutory redundancy pay and holiday pay. The letter also said, "Ex-gratia Payment - You will receive an ex-gratia payment equivalent to three months' salary. This payment amounts to £20,625. The payment is free of Tax and NI deductions."
Ms O'Farrell then claimed that the company was in breach of contract by failing to pay her notice pay. The company argued that the ex-gratia payment was meant to be a notice payment, but the tribunal rejected that argument and found for Mrs O'Farrell.
At the company's appeal the Employment Appeal Tribunal held that the issue was how should the ex-gratia clause in the letter to Ms O'Farell be construed. Did the words mean 'we are hereby paying you for your period of notice' or did they mean 'we are hereby paying you a sum other than the monies to which you would be entitled by way of pay in lieu of notice'? To an ordinary reader the letter meant that three payments were to be made. The company was legally obliged to pay two of them, the third was a payment "made freely and not under obligation". Nothing in the language used in the letter of 14th May 2009 suggested that the ex-gratia payment was a payment for a period of notice and no background information put forward changed that position. The tribunal's interpretation of the words ex-gratia was therefore held to be correct and the company's appeal was dismissed.
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