29 October 2007
A breach by the employer of a fundamental term of the employment contract could give cause for an employee to resign and bring a claim for unfair dismissal. These types of cases, known as constructive dismissals, frequently cite a breach of trust and confidence and could entitle the employee to compensation. However, a tribunal must first establish the facts.
Constructive dismissals are usually, but not necessarily, unfair. It is not enough for the employee to leave merely because the employer has acted unreasonably. The employer’s conduct must amount to a breach of an express or an implied term of the employment contract. The question before a tribunal will be whether, on the evidence presented, it considers that there was a sufficiently fundamental breach of contract on the part of the employer which caused the employee to resign, with or without notice or with short notice. Whether or not the employee’s resignation is as a result of the breach is a question of fact for the tribunal to decide.
The sometimes difficult requirement to identify a breach of a specific contractual term led to the development in case law of the implied term of trust and confidence on which many constructive dismissal claims now rely. The House of Lords in Malik v BCCI (1997) firmly established the principle that “an employer must not, without reasonable and proper cause, conduct itself in a manner calculated and likely to destroy or seriously damage the relationship of trust and confidence between employer and employee". Later, in Abbey National PLC v Fairbrother (2007), the EAT suggested that, when deciding if there had been a breach of trust and confidence in a constructive dismissal case, tribunals should:
- First consider whether an employer had reasonable and proper cause for its conduct.
- Then consider if the conduct was calculated or likely to destroy or seriously damage the relationship of trust and confidence.
In constructive dismissal cases the employee will have a claim for damages for breach of contract and may be eligible to bring a claim for compensation for unfair dismissal. In order to bring an unfair dismissal claim the employee must have the qualifying period of service, normally of one year. In constructive dismissal cases the qualifying period of service, and the time limit for bringing the claim, is calculated from the effective date of the resignation and not from any earlier date when the employer is alleged to have committed the breach.
In addition, the Statutory Grievance Procedure applies to the above claims and an employee will be barred from presenting their claim unless they have put the complaint in writing to the employer and allowed a period of 28 days before commencing proceedings. However, it is important to note that in Shergold v Fieldway Medical Centre (2005) the EAT held that an employee’s resignation letter, which explained the reasons for the resignation, did satisfy the minimal requirements and constituted a Step 1 letter. Employers should therefore take precautions when an employee resigns to consider carefully the content of the letter and act accordingly as, in the event of a subsequent claim, any compensation awarded may be increased by 10-50% if the employer has failed to comply with the procedure.
If an employee is found to have been unfairly dismissed a tribunal can make an award of compensation, which it considers just and equitable, up to a maximum of £60,600. The compensatory award will include actual loss of earnings and may take into account future losses incurred until the employee could reasonably be expected to find another job or obtain the same level of earnings, but will exclude compensation for the manner of the dismissal, such as injury to feelings. However, for constructive dismissal cases, the House of Lords has held that any losses before dismissal, which flow from the breach of trust and confidence, as against the losses arising from the dismissal itself, can still be pursued but as an independent breach of contract claim.
Making this distinction and separating the causes of action can be problematic as one employee found out to her cost last week in GMB Union v Brown (2007). Ms Brown had been on sick leave since September 2003 with occupational stress following proposed changes to her role. In February 2005, Ms Brown raised a grievance regarding the change of role and specifically, the way in which her manager had handled the situation. As her complaint concerned her manager, she requested that her grievance be heard at Stage 2 of the employer’s procedure by a different manager. Her request was repeatedly denied and, on 20 May 2005, Ms Brown resigned claiming that there had been no proper attempt to resolve her grievance and brought a claim for constructive unfair dismissal. The tribunal upheld her complaint as a breach of trust and confidence and awarded her compensation of £40,883 from the date of her resignation. On appeal, the EAT accepted that the tribunal had erred by compensating her for a period of future loss when she could not immediately return to work due to illness. It agreed with the employer that the stress she suffered was a consequence of conduct that preceded the dismissal and did not stem from the dismissal itself. As the Claimant could only recover these damages through a separate breach of contract claim, which she did not bring, the compensation for her unfair dismissal claim was reduced by £4,664.
Often, employers do not realise that a constructive dismissal claim is on the way until the employee has resigned and then it will often be too late to rectify the situation. However, employers should not necessarily resign themselves to the fact that a claim of breach of trust and confidence will always succeed and it is worth taking legal advice.