When enough is enough

Claims for constructive unfair dismissal can be costly and difficult for employers to defend. Jeanette Wheeler examines what is involved.

So when is treatment of an employee so poor that they can walk out and claim that in fact they have been constructively dismissed? What can you and your HR managers do about it?

The Legal Test

To start with it is worthwhile taking the time to review the legal test for constructive unfair dismissal (or “CUD” as I shall refer to it). In theory the test appears to be relatively straightforward. The onus is on the employee to prove the following elements:

Firstly, that the employer has committed an actual or anticipatory breach of an express or implied term of the contract of employment (in many cases it is the implied term of trust and confidence which is at issue).

Secondly, it must be shown that looked at objectively the breach in question is so sufficiently serious (often referred to as a fundamental or repudiatory breach) so as to justify the employee resigning. If the breach is of the implied term of trust and confidence, then the employee must show that the employer acted in a way calculated or likely to destroy or seriously damage the employment relationship.

Thirdly, the employee must persuade the Tribunal that he or she resigned in response to that breach. With regards to this last point there are a few points worthy of note:

• The employee must resign reasonably promptly in order to avoid the accusation that he or she actually waived the alleged breach.
• The employee may give notice rather than resign and leave straight away – the Tribunals recognise that an employee may not be able to afford to simply leave immediately.
• A claim of CUD is not necessarily defeated where the employee leaves to take up alternative employment – again the Tribunals recognise the fact that an employee may need to line up alternative employment before they can afford to resign in response to a breach. However the breach must be the effective cause for the employee deciding to move on.

Fourthly and finally, it remains open for the employer to persuade the Tribunal that notwithstanding any serious breach of contract the effective dismissal was still fair – potentially not an easy thing to do. But not impossible. Say for example that an employer pays an employee only half their salary one month because the employer is having financial difficulties and is waiting for a customer to pay up and it has discussed the situation with the employee and has promised to pay the balance of salary as soon as it can. The employer will have fundamentally breached the contract of employment but it is possible that its actions were reasonable in the circumstances and therefore any unfair dismissal claim which results may fail.

The Last Straw

Last straw dismissals are not uncommon. This is when the employee alleges that a series of actions by the employer cumulatively add up to a very serious breach of contract. The individual actions or events themselves may not be breaches of contract (or may only be minor breaches) but taken as a whole the employee can say that they have had enough. The last action of the employer however must be capable of adding something to the breach – i.e. it cannot be an entirely innocuous action.

These last straw cases are increasingly problematic for employers. The actions complained about often go back years and are numerous in number. This means that such complaints generate lots of paperwork, suck up huge amounts of management time, usually mean the attendance at Tribunal (and in internal grievances) of lots of witnesses and overall can be very costly and difficult to manage.

In particular many such last straw claims can arise out of personality clashes. In these situations early intervention is key. Consider mediation or a change of reporting lines. Try to remove the root cause of the problem as soon as is possible. These sorts of relationships rarely get better of their own accord.

The positive news

On the plus side, the test for whether an employer’s actions amount to a breach is an objective test. So if you are dealing with a breach of trust and confidence and the employee feels hard done by but objectively the average bystander (or Tribunal Judge) doesn’t think things were that bad, then the employee’s claim will fail.

In practice whether the employer’s actions amount to a serious breach of the implied term of trust and confidence will be a matter of issue, degree and general impression bearing in mind the particular context. This means that witness credibility in Tribunal will be very important – does the manager come across as a bully or was the employee being oversensitive or cynically manipulating a situation?

The less positive news – is it possible to remedy a breach?

The simple answer is no. This was confirmed by the Court of Appeal in the 2010 appeal case of Bournemouth University v Buckland. Professor Buckland alleged that his employer had breached the implied of term of trust and confidence when it arranged for exam papers which he had originally assessed to be remarked and up-graded without his backing. Buckland had raised an internal grievance about the matter which the University had upheld so vindicating him completely. Notwithstanding this Buckland still resigned. The Court of Appeal confirmed that a matter of general contract law (which applies equally to employment contracts), there is no way to cure a breach.

Heat of the moment

One thing an employer can do and indeed should do to attempt to bring a deteriorating situation back from the brink is allow an employee a cooling off period if they purport to resign in the heat of the moment. The Tribunals recommend in any event that employees should be given a day or two to rethink a heat of the moment resignation and consider if they really want to walk. An employer should not assume that the resignation stands where an employee resigns under pressure or in tears – follow up with a request that they confirm their intentions.

Get the breach waived or affirmed

In addition if you have done wrong, try to persuade them to give you a chance to put matters right where possible. The Court of Appeal in Buckland recognised that in cases where an employer goes to significant lengths to try and resolve things then the Courts should take a robust approach in deciding if the breach has actually been waived and the contract of employment affirmed.

In summary, if there is a chance to pour calm over troubled waters then take it. It won’t let you off the legal hook if the employee decides that they don’t want to be pacified but you may be able to persuade certain employees to remain employed and so avoid legal action altogether or at least ensure they remain employed long enough for the Tribunal to conclude that the breach had been waived and the contract affirmed. Of course if an employee does relent and stays working for you, it is possible that the original breach can be revived again if future more minor breaches occur – so still leaving the possibility of a final straw resignation/dismissal in the future.

Examples of CUD

So whilst you ponder all the legal angles above, here are some examples where the Tribunals did find a CUD claim proved. Remember however that each case will be decided on its own particular facts.

• Unilaterally reducing an employee's pay (Industrial Rubber Products v Gillon [1977] IRLR 389) or commission (Star Newspapers Ltd v Jordan EAT 344/93).
• Unilaterally varying an employee's benefits or duties (or demotion) (Jones v F Sirl & Son (Furnishers) Ltd [1997] IRLR 493).
• Failing to give an employee a reasonable opportunity to obtain redress in respect of a grievance (WA Goold (Pearmak) Ltd v McConnell [1995] IRLR 516).
• Discriminating against an employee (Shaw v CCL Ltd UKEAT/0512/06).
• Operating a clause in a contract which gives the employer the right to vary an employee’s sales territory but doing it in such a way as to cause the employee to lose significant commission income and/or travel twice as much each day to fulfil his or her duties.

Jeanette Wheeler is a partner at Birketts.