martin_malone180x182Constructive dismissal arises when an employee is effectively prevented from continuing to work as a result of the employer’s actions. Martin Malone discusses this potentially complicated but nonetheless frequently encountered issue.

An employee claiming unfair dismissal must prove either that the employer has terminated the contract of employment, that a fixed-term contract has expired or that the employee has terminated the contract with or without notice and alleges constructive dismissal.

the statutory definition

The Employment Rights Act 1996, s. 95(1) provides that there is a dismissal if:

(c) the employee terminates the contract under which he is employed (with or without notice) in circumstances in which he is entitled to terminate it without notice by reason of the employer’s conduct.

the test

The employee must establish more than unreasonable or oppressive conduct on the part of the employer. Whether or not an employee is entitled to terminate the contract is a question of fact to be determined in accordance with contractual principles. The words “entitled” and “without notice” are contractual concepts. An employee is entitled to treat himself as constructively dismissed if the employer is guilty of conduct which is a significant breach going to the root of the contract of employment; or which shows that the employer no longer intends to be bound by one or more of the essential terms of the contract (Western Excavating (ECC) Ltd v Sharp [1978] IRLR 27).

mutual trust and confidence

There is a mutual obligation of trust and confidence between employer and employee. In respect of employers it entails an obligation that they will not conduct themselves in a manner calculated or likely to destroy or seriously damage the relationship of confidence and trust between employer and employee. Any breach of this implied term is a fundamental breach amounting to a repudiation since it necessarily goes to the root of the contract. To constitute a breach of this implied term it is not necessary to show that the employer intended any repudiation of the contract. The employment tribunal’s function is to look at the employer’s conduct as a whole and determine whether it is such that its cumulative effect judged reasonably and sensibly is such that the employee cannot be expected to put up with it (Woods v W M Car Services (Peterborough) Ltd [1982] IRLR 413, approved in Malik & Anor v Bank of Credit and Commerce International SA [1997] IRLR 462).

The implied duty of mutual trust and confidence in a contract of employment does not include a positive obligation on the employer to warn an employee who is proposing to exercise important rights in connection with the contract of employment that the way he is proposing to exercise them may not be the most financially advantageous. Although the duty of mutual trust and confidence may in principle impose positive obligations, recognition of a duty to alert an employee to the possibility that he was making a financial mistake would have far-reaching consequences for the employment relationship and would not sit well with other default obligations implied by law in the employment context (University of Nottingham v (1) Eyett (2) The Pensions Ombudsman [1999] IRLR 87).

Where a local authority councillor had subjected a council employee to verbal abuse and accusations of dishonesty while he was carrying out duties on council premises there was a breach of the duty of mutual trust and confidence which entitled the employee to resign and claim constructive dismissal. It is an implied term that the employer will provide and maintain a working environment which is reasonably tolerable to all employees (Moores v Bude-Stratton Town Council [2000] IRLR 676).

the burden of proof

The employee must prove dismissal. Therefore the employee must prove:

  • the nature of the contractual obligation;
  • the breach;
  • that the term or the breach is fundamental;
  • that the employer has actually broken the contract;
  • that the employee has accepted the repudiation and terminated the contract;
  • that the employee has neither affirmed the breach nor delayed before acting.
relevant terms

Each case has to be decided on its merits in accordance with contractual principles but there are a number of recognised employment situations where the employment tribunals and courts have detected a fundamental breach. The list is not exhaustive, and judicial attitudes have reflected trends in employment relations, but in these categories there has been a willingness to recognise an employer’s conduct as a fundamental breach:

  • pay;
  • job duties;
  • location;
  • hours of work;
  • disciplinary and grievance procedure; and
  • in a transfer situation.

If one of your employees is claiming constructive dismissal or if you are concerned about the possibility of such a claim then contact us now for a free assessment and initial advice.