*Where there is no Payment in Lieu of Notice (“PILON”) clause in the contract of employment, the PILON technically represents damages for breach of contract (wrongful dismissal).
For this reason, it is important to ensure any non-contractual PILON includes all benefits the Employee would have received had they worked their notice period, such as holiday pay and Employer pension contributions, so the Employee has no outstanding claim for wrongful dismissal.
Also, the Employer’s technical breach of contract may have the effect of releasing the Employee from restrictive covenants set out in their contract of employment (where applicable) so they are no longer bound by these.
Where the Employer wishes to rely on restrictive covenants after the termination date, the Employer should obtain the Employee’s agreement to the PILON, to avoid a breach of contract.
The optional clause can be used for the purpose of seeking the employee’s agreement to a non-contractual PILON.