Constructive Dismissal – Clutching at (last) straws?

It’s obvious that an unfair dismissal claim requires there to have been a dismissal of the employee by the employer.

Employers will be aware, though, that a dismissal can arise in a number of ways:

  1. Express dismissal by the employer (“You’re fired”)
  2. Expiry and non-renewal of a limited term (fixed-term) contract
  3. Termination of the employment by the employee (resignation) – with or without notice, where  he/she is entitled to terminate the employment without notice due to the employer’s material breach of contract

The third scenario comes into play in “constructive dismissal” claims. The employee resigns but argues that they were entitled to do so due to the employer’s actions, which amount to a fundamental breach of contract.   A constructive unfair dismissal claim can be pursued in the usual way (subject to the usual requirements for continuous service etc.).  Compensation can be awarded as if the employee had been ”fired” by the employer.

One vital task for the employment tribunal in such cases is to decide whether the employer did in fact materially breach the contract of employment and whether the employee resigned in response to that breach without delaying too long.

What constitutes a breach by an employer?

An employee may wish to rely on a breach by the employer of an express, written term of the contract of employment. However, often they will rely on the “implied term” of “trust and confidence”.  It is an implied term of every contract of employment that “the employer shall not without reasonable and proper cause conduct itself in a manner calculated or likely to destroy or seriously damage the relationship of confidence and trust between employer and employee”. This is close to saying that an employer must not treat an employee wholly unreasonably.

The last straw

Employees will often rely on the “last straw” doctrine. This recognises that the employer’s actions which are in breach of the contract of employment may not be a single act. There may be a number of acts over a period of time, each of which individually may not be serious enough to amount to a material breach of contract.

However, where the employee resigns in response to a “last straw” at the end of a series of employer actions, the employee may be able to argue that looking at the employer’s conduct over a period of time, it was bad enough, taken together, to amount to a material breach of contract.  The last straw may not be particularly serious in itself, and may not in itself be a breach of contract, but it can often be enough to allow the employee to succeed in a constructive dismissal claim.

The recent Employment Appeal Tribunal (“EAT”) decision of Craig v Abellio Ltd concerned a constructive dismissal claim, and a “last straw” argument.  The employee had encountered a number of issues with his employer, over pay and hours of work, and underpayment of sick pay.  He had raised a grievance which was rejected, but then upheld on appeal.  The employer agreed to pay Mr Craig £6000 in arrears of pay by an agreed date.  It failed to do so.  The employee resigned and claimed constructive dismissal.  The employment tribunal rejected the claim.  It considered there had been no constructive dismissal and no material breach of contract by the employer. The pay and hours issues had been resolved by the grievance appeal outcome, and the failure to pay the sum by the agreed date was just an oversight. 

The employee appealed to the EAT, which allowed the appeal and instructed that the case be re-heard by another tribunal.  The original employment tribunal had not properly considered the “last straw” doctrine and whether, in the context of the preceding chain of events, the employer’s failure to pay the £6000 by the agreed date was a “last straw” justifying the employee in resigning and considering the employer to be in material breach of contract.   Even if it was a mistake or oversight, the failure to make payment could still be enough to show that the employer had, taking everything together, breached the “implied duty of trust and confidence”.

Key takeaways?

This interesting case is a reminder for employers that it is not enough to focus simply on “getting it right” when disciplining and dismissing staff. Unfair dismissal claims can arise where there has been no express dismissal, and the employer’s actions over an extended period of time may be examined by the employment tribunal.  

One  point to take from this case is that while a grievance procedure, if properly handled, gives the employer an opportunity to resolve matters internally and avoid a tribunal claim being raised, if the employer then fails to implement the agreed remedial action following the grievance outcome, that is likely to be a significant factor for an employee arguing constructive dismissal.

As ever, please contact a member of our Specialist Employment Law Team for further advice.

This update contains general information only and does not constitute legal or other professional advice.

Douglas Strang, Senior Associate: dst@bto.co.uk / 0141 221 8012

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