PILON and Benefits

Hi All,

I'm looking for some clarification on the payment of compensation for benefits if PILON is used.

I have a PILON clause in my contract. I have been told I will leave on 31/3/11 and be given the 3 months notice as PILON. I drive a company car, have private healthcare, pension, holidays and also have shares due to vest on 11/4/11.

According to an employment solicitor I have spoken to (who checked with a Barrister) there is no case law relating to this. My PILON clause does not specify basic pay only and in their opinion I should be entitled to compensation for the loss of these benefits. ACAS has also stated this.

However reading this forum there seems to be advice saying you are not entitled to compensation if there is a PILON clause in your contract?

many thanks

You wouldn't normally get compensation for loss of benefits because your contract states that your employer can terminate immediately and pay you in lieu of notice, so 'compensation' isn't required because the contract hasn't been breached. You are only entitled to those benefits during employment and as your employer are within their contractual rights to end your employment immediately, you have no argument that you were contractually entitled to those benefits.

However if you have taken legal advice about the wording of your own contract and your lawyer thinks that your employer has breached your contract by not giving you a sum additional to your salary to reflect the benefits you would have been entitled to had they not exercised the PILON clause, then you can consider suing them for that breach.

Thanks Eleanor,

It was the fact that my PILON clause did not spefically mention only paying basic salary that the advice was that I have a claim. How do you see this?

To be honest I've never come across a clause that specifically mentions basic salary only other than in cases where remuneration is also paid in the form of bonuses and the desire is to avoid that in the event of PILON. Other than that clauses I've come across/used just refer to a right to pay in lieu of notice, and I would take that to mean you will receive the pay that you would have received (ie not compensation for non-cash benefits).

So if I were your employer I'd feel pretty comfortable defending a claim that by only giving pay (rather than pay plus extra) in lieu of notice I was breaching the contract.

If there's no case law where someone's claimed that pay in lieu of notice should incorporate more than just pay (and I have not looked into it myself), then you'd be testing the law and wouldn't have a lot in terms of legislation/case law to back you up. Which isn't to say your solicitor isn't right, but 'you should be entitled money to compensate for loss of benefits' is not the same as 'here's x,y and z reasons why I think you have a good legal case to make that claim'.

Perhaps I should be tightening up the wording of clauses I use!

Ha ha maybe you should!

Interesting meeting today whereby they told me the redundancy has not been confirmed yet as I have raised queries over the scoring process.

One thing they said that puzzled me was that when they make the final decision I will called to a further meeting and told, then given a letter informing me I have 7 days notice. They say they have to give the 7 days by law? Would this be 7 working days or calender days?

Either way it helps get closer to the 11th April share vesting date!