Constructive Dismissal

Transcription

1 Constructive Dismissal The law recognises that sometimes an employer will not expressly dismiss an employee, but will instead act in such an unacceptable manner that the employee should be legally entitled to treat the employment contract as having come to an end. An employee in this situation is entitled to resign (with or without notice) and claim that they have been unfairly dismissed; this is known as Constructive Dismissal or Constructive Unfair Dismissal. ESTABLISHING CONSTRUCTIVE DISMISSAL Three elements are needed before an employee can establish that they have been constructively unfairly dismissed: 1. There must be a repudiatory breach of contract by the employer. This may be an actual or anticipatory breach, but must be sufficiently serious to justify the employee resigning. 2. The employee must elect to accept the breach and treat the contract of employment as being at an end. In practise this means that the employee must resign in response to the breach. 3. The employee must not delay too long in accepting the breach. Any unwarranted delay on the part of the employee may lead to arguments that the breach has been waived and that the contract is continuing. These elements are considered in further detail below. EMPLOYER MUST BE IN REPUDIATORY BREACH OF CONTRACT The employer s repudiatory breach may be of an express or implied term of the contract. The breach may be actual or anticipatory and may consist of a one-off serious act or a continuing course of conduct extending over a period, culminating in an act which the employee considers to be the last straw. Unless a breach of contract is very serious and either goes to the root of the contract or shows that the employer no longer intends to be bound by one or more of the essential terms of the contract of employment, it will normally fall short of being a repudiatory breach. Whether the breach is sufficiently serious to be classed as repudiatory is a question of fact and degree. Although, the EAT has indicated that, where the implied duty of trust and confidence has been broken, this will inevitably be serious enough to constitute a repudiatory breach (Morrow v Safeway Stores plc [2002] IRLR 9, EAT). Examples of repudiatory breaches Salary - unilateral reduction in an employee s pay, even for good reasons and to a small extent (Industrial Rubber Products v Gillon [1977] IRLR 389), or commission (Star Newspapers Ltd v Jordan EAT/344/93); Duties - changing the employee s contractual duties (to the extent that the contract does not permit), whether by removing some duties or requiring the employee to perform new ones (Hilton v Shiner Ltd

2 Sometimes, an employee can resign in response to a series of minor breaches of contract or a course of conduct by their employer which, taken cumulatively, amounts to a breach of the implied term of trust and confidence which is implied into every employment contract. This is called the last straw doctrine. [2001] IRLR 727), particularly where the duties in question go to the heart of the contract (McBride v Falkirk Football and Athletic Club [2012] IRLR 22); Discrimination - discrimination against the employee will usually constitute a repudiatory breach (Nottinghamshire County Council v Meikle [2004] IRLR 703) but it is sometimes possible for the employer to cure the breach during any internal appeal process (Little v Richmond Pharmacology Ltd UKEAT/0490/12); Failure to address grievance a term is implied into every employment contract that the employer will give an employee a reasonable opportunity to obtain redress in respect of a grievance and a breach of this term will constitute a repudiatory breach (WA Goold (Pearmak) Ltd v McConnell [1995] IRLR 516), but poor handling of a grievance does not always constitute a repudiatory breach (Sawar v SKF (UK) Ltd UKEAT/0355/09). Inept handling of disciplinary matters if a suspension or disiplinary allegation is manifestly unreasonable, particularly in cases where the allegation is of the utmost seriousness (Gogay v Hertfordshire County Council [2000] IRLR 703). Intolerable working environment such as a bullying or abusive manager with a forceful, high-handed, management style who takes every opportunity to vent disapproval, sometimes in the presence of others, in an attempt to frighten the employee into reaching the required performance standards in a way that is neither proportionate, nor compatible with the general duty of co-operation (Horkulak v Cantor Fitzgerald International [2003] IRLR 756). The above is a non-exhaustive list of examples of the kind of breach which has resulted in a successful constructive dismissal claim. Specific advice should always be sought when considering whether a particular incident (or series of incidents) is sufficient to found a constructive dismissal claim. The act complained of can be based on the behaviour of a fellow employee towards the employee bringing the claim, based upon the behaviour of the employer towards fellow employees or third parties or relating to the behaviour of a third party if the employer is legally responsible for this or has failed to protect the employee from it. The last straw doctrine Sometimes, an employee can resign in response to a series of minor breaches of contract or a course of conduct by their employer which, taken cumulatively, amounts to a breach of the implied term of trust and confidence which is implied into every employment contract. This is called the last straw doctrine because often the final incident in the chain is in itself minor, but taken together with the whole series of incidents, it is nonetheless sufficient to breach the implied term of trust and confidence. The test is whether, viewed objectively, the course of conduct showed that the employer, over time, had demonstrated an intention to no longer be bound by the contract of employment. If earlier breaches of contract have been waived by the employee, the last straw doctrine can sometimes be used to bring earlier breaches of contract to life the EAT has said: a tribunal.must look and see if the final incident is sufficient of a trigger to revive the earlier ones. This will involve looking at the quality of the incidents themselves, the length of time both overall and between the incidents, and. any balancing factors which may have, at any point, been taken to constitute a waiver of earlier breaches. Finally, the very nature of the waiver will need to be considered.is it a once and for all

3 An employer s repudiatory breach does not bring the contract to an end automatically: the contract is not terminated until the breach is accepted by the employee. waiver, or do the circumstances give rise to the implication of a conditional waiver, for instance a waiver subject to the condition that there would be no repeat of similar conduct... (Hamill v J V Strong & Co [2001] ALL ER (D) 18). The last straw incident must contribute something to the breach, although what it added might be relatively insignificant. Whilst it must not be utterly trivial, it is not necessary for it to be unreasonable of blameworthy and it does not have to be of the same character as earlier acts complained of. However, an entirely innocuous act on the part of the employer cannot be a last straw incident (Waltham Forest v Omilaju [2004] EWCA Civ 1493). EMPLOYEE MUST ACCEPT EMPLOYER S REPUDIATORY BREACH An employer s repudiatory breach does not bring the contract to an end automatically: the contract is not terminated until the breach is accepted by the employee (Boyo v Lambeth LBC [1995] IRLR 50). Provided the fact that they have accepted the breach is unequivocal and unambiguous, the employee does not have to expressly communicate acceptance of the breach to the employer (State Trading Corporation of India Ltd v M Golodetz Ltd [1989] 2 Lloyd s Rep 277). There is conflicting case law on whether or not an employee, who is him or herself in repudiatory breach of contract (e.g. has acted in breach of trust and confidence), can rely upon the employer s repudiatory breach to claim constructive dismissal (see: RDF Media Group plc and another v Clements [2007] EWHC 2892 and Tullett Prebon plc and others v BGC Brokers LP and others [2010] IRLR 648). time without leaving, he will be regarded as having elected to affirm the contract and will lose his right to treat himself as discharged (Western Excavating v Sharp). Affirmation of the contract may be implied if the employee calls on the employer for further performance of the contract or the employee themselves acts in a way which is only consistent with the continued existence of the contract. Therefore, if an employee faced with repudiation by their employer goes to work the next day or accept pay, he or she may be said to be affirming the contract. However, provided the employee makes clear their objection to what is being done, they are not to be taken to have affirmed the contract by continuing to work and draw pay for a limited period of time after the breach, even if their purpose is to enable them to find alternative work (Marriott v Oxford Co-operative Society [1970] 1 QB 186). Employee must resign in response to breach Generally, to establish constructive dismissal, an employee must be able to show that they resigned in response to the relevant breach. The breach does not have to be the only cause of the employee s resignation (Nottinghamshire County Council v Meikle [2004] IRLR 703) provided it played a part and was one of the factors relied upon (Wright v North Ayrshire Council UKEAT/0017/13). It is not necessary for the employee to make their reason for leaving clear to the employer (Weathersfield Ltd v Sargent [1999] IRLR 94). When faced with an employer s repudiatory breach, the employee must make up his mind soon after the conduct of which he complains. If he continues for any length of

4 If an employee proves that they have been constructively dismissed, this will give rise to a claim for damages for wrongful dismissal. They may also claim unfair dismissal if the employee has the requisite 2 years qualifying service (or no qualifying service is required because the complaint relates to an automatically unfair dismissal). THE EMPLOYEE MUST NOT DELAY TOO LONG Mere delay on the part of the innocent party does not, by itself (unaccompanied by any express or implied affirmation of the contract), constitute affirmation. However, if it is prolonged it may be evidence of an implied affirmation (W E Cox Toner (International) Ltd v Crook [1981] IRLR 443). Working under protest Occasionally, an employee may continue to work and perform their contractual obligations under protest to buy time and keep their options open. In these circumstances, if the employee continues to work but at the same time makes it clear that they are reserving their rights, or are only continuing to work so as to allow the employer a chance to remedy the breach, such further performance will not prejudice their right subsequently to accept the repudiation and claim constructive dismissal. Delay may or may not be fatal to a constructive dismissal claim Each case will turn on its own facts. There are many examples of occasions from earlier case law when delay did not prove fatal to an employee s constructive dismissal claim and it is difficult to identify any guiding principles from the case law. In some cases, delays amounting to several weeks have not proven fatal to constructive dismissal claims, particularly where the employee has been ill. However, in other cases, short delays e.g. to seek legal advice, have proven fatal. IS A CONSTRUCTIVE DISMISSAL UNFAIR? If an employee proves that they have been constructively dismissed, this will give rise to a claim for damages for wrongful dismissal. They may also claim unfair dismissal if the employee has the requisite 2 years qualifying service (or no qualifying service is required because the complaint relates to an automatically unfair dismissal). Save in cases of automatic unfair dismissal, the tribunal must consider whether the dismissal was fair or unfair. The tribunal has to decide whether, in the circumstances, the employer s decision to dismiss the employee fell within the range of reasonable responses that a reasonable employer might have adopted (Iceland Frozen Foods Ltd v Jones [1982] IRLR 439). A constructive dismissal is not necessarily an unfair dismissal - the tribunal must look at the employer s conduct and decide whether it acted fairly (Allders International Ltd v Parkins [1981] IRLR 68). However, in reality, it will be difficult for an employer to bring itself within the range of reasonable responses in circumstances where it has fundamentally breached the employment contract. COMPENSATION FOR CONSTRUCTIVE DISMISSAL Once a tribunal has held that an employee has been constructively dismissed, it will have to assess the loss for which the employer is responsible. This may include: Breach of contract - damages for breach of contract the employee should be put in the financial position they would have been in had the contract been

5 A failure to submit a grievance before bringing a claim for constructive dismissal will not bar an employee from bringing a claim, but it may affect the level of any compensation awarded. performed lawfully (e.g. the value of their net remuneration package for their contractual notice period). Unfair dismissal basic award (based upon length of service and age) and compensatory award up to the maximum of whichever is lower of one years gross pay or 74,200 (until 31st January 2014). The tribunal may make the usual Polkey or contributory fault deductions. GRIEVANCES A failure to submit a grievance before bringing a claim for constructive dismissal will not bar an employee from bringing a claim, but it may affect the level of any compensation awarded. Tribunals can reduce awards by up to 25% for failure to follow the ACAS Code in bringing a grievance. Likewise, if an employee submits a grievance about the employer s repudiatory breach, which the employer does not deal with in accordance with the Acas Code, the tribunal can increase the employee s compensation by up to 25%. Should you have any questions please contact your usual Pannone contact or: James Lister, Partner, tel or james.lister@pannone.co.uk The material in this guidance note is intended for information purposes only. Although the law referred to is correct at the time of printing, there may have been changes subsequently. Therefore the information within this guidance note should not be applied to any particular set of facts or relied upon without legal or other professional advice. The content of this guidance note is the copyright work of Pannone part of Slater & Gordon and no part of it may be reproduced in any form without the prior permission of Pannone part of Slater & Gordon. Slater & Gordon (UK) LLP is authorised and regulated by the Solicitors Regulation Authority.