PILON’s must be express
by Sarah
A Scottish case has ruled that Pay in lieu of Notice (PILON) clauses cannot be implied into contracts of employment. If an employer wishes to pay their employees a PILON, then there must be an express term allowing it otherwise it will be a breach of contract.
This decision which can be read here is important for tax reasons and for the employer in particular. If the employer breaches the contract, then they are unlikely to be able to enforce restrictive covenants against the employee. In this case by making a PILON instead of allowing the employee to work his twelve month notice, the employer was depriving the employee of a bonus payment.
The Court of session stated that “it had strong reservations as to whether, in the 21st Century, there is any scope for the implication of such a term” as it would contrary to the express right for him to receive notice.
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