The decision, by a majority of three Supreme Court judges to two, confirms the approach consistently taken by judges in employment appeal tribunal (EAT) cases. It is based on the idea that notice "must have been communicated or come to the mind of the addressee", as well as the importance that both employer and employee are aware of an individual's employment status.
The court found that an "implied term" should be read into the employment contract of Newcastle upon Tyne NHS Hospitals NHS Foundation Trust employee Mrs Haywood, stating that a notice served on the employee takes effect "only when it has actually been received by the employee and the employee has either read or had a reasonable opportunity of reading it".
Lady Hale, giving the judgment of the court, added that it was "open" to the employer to expressly provide otherwise in the contract "if [it] does consider that this implied term would cause problems".
Haywood had worked for various NHS bodies in various roles for many years, under a contract of employment which required 12 weeks' notice of termination by either party. The contract also provided that, if her employment be terminated by reason of redundancy on or after her 50th birthday, Haywood would be entitled to an enhanced early retirement pension.
The trust issued written notice of termination of Haywood's employment on grounds of redundancy on 20 April 2011. It did so in three ways: letter sent by first-class post; letter sent by recorded delivery; and email sent to Haywood's husband's email address. Haywood was on holiday abroad between 18 April and 27 April. She returned home on 27 April and read the recorded delivery letter.
Haywood's 50th birthday was 20 July 2011. She claimed that she was entitled to the early retirement pension on the basis that her 12 week notice period did not begin to run until she read the letter on 27 April. The trust argued that the notice period began running on 21 April, the date that delivery of the recorded letter was attempted. If the trust was correct, the notice period would expire on 15 July, and she would not be entitled to the enhanced pension.
The High Court found in favour of Haywood, following the line of EAT case law. The trust appealed. Although the Court of Appeal was split, the majority agreed that the appeal should be dismissed. Lord Justice Lewison, however, would have allowed the appeal, finding that notice "is validly given under the contract when a letter containing the notice actually arrives at the correct destination, whether the recipient is there to open it or not".
The trust argued before the Supreme Court that there was a common law rule that notice was given when a letter was delivered to its address, derived primarily from some historic landlord and tenant cases. However, the Supreme Court, reviewing these cases, said that they were not a "ringing endorsement" of the trust's position, as receipt of the notice was always required "and arguably by a person authorised to receive it". The 1978 Interpretation Act creates a presumption of receipt from proof of posting, but this presumption is rebuttable.
Regardless, the Supreme Court backed the "consistent" approach of the EAT. The EAT is "an expert tribunal which must be taken to be familiar with employment practices, as well as the general merits in employment cases", Lady Hale said. In addition, the particular contract in dispute was concluded "when those cases were thought to represent the general law", she said.
Lord Briggs, in a dissenting judgment, said that he would have allowed the appeal. In his view, contracts of employment are "only a sub-species of a much larger group of what may be described as relationship contracts terminable on notice", and should be treated no differently. There was also a "sensible and even-handed policy objective" behind notice becoming effective on delivery, namely certainty, he said.
"This case is a very useful reminder to employers that in the field of employment law the courts can and do take a different approach to contract issues than they might in other business situations," said employment law expert Stuart Neilson of Pinsent Masons, the law firm behind Out-Law.com.
"The case is helpful in clarifying that the base line position in employment law is that a notice to an employee only takes effect when the employee reads it - or has had a reasonable opportunity to read it. Employers need to think carefully about the time at which they give a notice, particularly if they know the employee may be away or otherwise unable to read the notice until a later date," he said.
"Prudent employers will take note that the case also gives clear guidance that this base line position can be changed by clear contractual provisions that stipulate when notice is deemed to be received. Many contracts will already contain such a deeming provision but, if not, employers should be putting that in," he said.
Editor's note 11/06/2018: this story previously said that Haywood returned from holiday on 28 April when she in fact returned on 27 April. The story has been changed and we apologise for the error.