When a company made its managing director redundant, it agreed to give him six months’ pay in lieu of notice. However, which it subsequently discovered that he had previously committed an act of gross misconduct, it refused to pay.
The director had ordered an accounts clerk to pay £10,000 to the company’s pension provider, which the company alleged was gross misconduct entitling it to terminate his contract immediately.
Lord Justice Mummery ruled that the company had to abide by the contractual consequences of its decision and must abide by the severance terms offered.
When considering making an employee who can authorise significant expenditure redundant, a quick review of the financial records before negotiations are completed may be a good idea.