- A payment by way of compensation on the termination of the contract
of employment, whether following judgment or by settlement, does not fall
within section 62.128
- It is unclear whether a payment will escape section 62 if it consists
of a sum stipulated in the contract as being paid by way of liquidated damages
in the event of termination.129 In theory, such payments should be treated
the same as (3) since they have the same purpose. The boundary between (4)
and (5–6) below would therefore be one of construction of the agreement.
If this is correct, the sums will have to be a genuine pre-estimate of loss.
One technical distinction is that in 5 and 6 the contract is not broken,
whereas in (4) it is; however, this does not help to answer the question
on which side of the line the arrangement falls. One might argue in favour
of bringing (4) within section 62 that, since they are part of the contract
and therefore capable of inspiring the employee to greater effort, they
must be payments for services. However, the same inspiration can be derived
from knowing that in the event of breach a party can sue for unliquidated
damages.
- A payment for continuing to work falls within section 62.130 Where it
is agreed between employer and employee that the contract shall cease with
effect from a future date, and the contract is allowed to run its natural
course until that date, all sums paid under the contract come within section
62. Payments made while serving out a period of notice remain taxable under
section 62.
- A payment in lieu of notice is taxable—at least where the right to
make such payment is reserved to the employer in the contract of employment.131
- Where the contract of employment stipulates the sum
to be paid in the event that the contract does not run its full course,
the payment of that sum in accordance with the contract comes within section
62. In Dale v De Soissons132
a three-year service agreement was terminable at the end of one or two
years by the company; the
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