UK: Resignation without notice - deduction from pay lawful

The EAT has ruled that it was not an unenforceable penalty for a contract to include a clause deducting a payment equal to the salary for the period of notice not worked when a highly skilled employee resigned, as this was a genuine pre-estimate of the losses that would be incurred in replacing the employee at short notice. The ruling supports the use of such clauses for highly skilled employees, but the EAT was at pains to warn that it should not be regarded as a precedent for the future as cases will be fact-specific.

Clauses should also be drafted carefully, ideally to establish a clear link between the amount of the payment and the expenses of recruitment due to early termination. Depending on the drafting, a clause linking the amount of the deduction directly to unworked notice might well be construed as intended only to provide that the employee would not be paid for any unworked period of notice (this was not argued by the parties in this case). (Li v First Marine Solutions)