PILON clauses

The Inner House of the Court of Session has held that PILON clauses cannot be implied into contracts of employment - i.e. if an employer wants to pay money in lieu of notice without being in breach of contract, there must be an express term allowing it to do so.

In this case, a financial director/company secretary's contract expressly stated he was entitled to 12 months' written notice. It was terminated without such notice. The company argued that the contract was subject to an implied term entitling them to pay in lieu (an effect of which would have been to deprive the Pursuer (Claimant)of a bonus). The Court of Session disagreed.

The Court stated that it had "strong reservations as to whether, in the 21st century, there is any scope for the implication of such a term", also holding that such an implied term would be contrary to the express right to receive twelve months' notice.

Morrish v NTL Group