In the next series of blog posts we’re going to look at the law relating to constructive dismissal. This will examine the 4 main elements in a constructive dismissal case:
Repudiatory breach on behalf of your employer; and
Acceptance of this repudiatory breach by the employee and termination of the contract of employment; and
The breach is (at least one of) the reasons for the employee’s resignation; and
The time period within which acceptance of a breach can take place
Today’s post will therefore cover repudiatory conduct
What is constructive dismissal?
Constructive dismissal occurs when the employer does not dismiss the employee but the employee resigns from their job as a result of their employer’s conduct. Constructive dismissal is a statutory claim, contained within s.95 Employment Rights Act 1996 (“ERA 96”). Under s.95(1)(c) an employee is dismissed only if the employee terminates the contract under which they are employed in circumstances in which they are entitled to terminate without notice by reason of the employer’s conduct. The employee may resign with or without notice but they must be entitled to do so.
Entitlement to resign
An employee must generally show that their employer’s conduct was such that it either satisfies the ‘contractual test’ or the ‘mutual trust and confidence test’.
The contract test involves one of either two sub-tests being satisfied:
1. That the employer was guilty of conduct which was a significant breach and which goes to the root of the contract of employment; or
2. The employer is guilty of conduct which shows that they no longer intend to be bound by one or more essential terms of the contract.
As well as the contract test the employee can use the ‘mutual trust and confidence’ test. Under this test the employee is entitled to resign if the employer acts in a way that is wholly unreasonable and has therefore destroyed the mutual trust and confidence which existed previously between the parties. This has become a standard inclusion in most constructive dismissal cases as it is a useful fall-back option if the contract test is not satisfied.
The necessary elements in a constructive dismissal case
1. Repudiatory breach on the part of your employer (either actual or anticipatory, relating to an express or an implied term, which is sufficiently serious to justify termination); and
2. Which has been accepted by the employee (and not waived), thereby terminating the contract; and
3. Is the reason for the employee’s resignation; and
4. The employee hasn’t taken too long in accepting the breach.
These four elements will now be considered in turn.
A repudiatory breach can be a breach of an express or an implied term. It may be an actual breach or an anticipatory repudiation. An actual breach would be your employer stating that your pay will be unilaterally (i.e. without your consent) reduced by 25% from this moment onwards. An anticipatory breach would be your employer stating that your pay would be unilaterally reduced by 25% in two weeks time (i.e. you’re anticipating the breach).
An express term can be written or oral, although it is obviously more difficult to prove the existence of an oral express term than a written one. The best place to start looking for express terms is within the contract of employment and ancillary documents (the staff handbook, restrictive covenants, grievance and disciplinary policy etc.) or may be within seemingly unconnected documents (i.e. an email where your line manager agreed to give you a raise). Implied terms are implied by statute or common law. Examples of implied terms are the terms of mutual trust and confidence, the duty to take reasonably practicable steps to provide a safe system of work, and the failure to investigate complaints relating to health and safety.
Whether an actual repudiatory breach has taken place involves a consideration of whether the employer has demonstrated over time an intention to no longer be bound by the terms of the contract. The repudiatory breach can either be a single incident or the “last straw” in a series of incidents. When it is a single repudiatory breach it is normally a lot easier to identify the breach and whether it is sufficiently serious to entitle the employee to resign. Where it is the “last straw” the situation is a bit more complicated. The employee can consider incidents that would otherwise have been “out of time” but the final incident must be a sufficient trigger (i.e. not trivial or innocuous). The length of the time between the incidents must also not be too great and the incidents must have been sufficiently serious as a whole to justify treating them as a series. The Employment Tribunal will also look at the circumstances of the case in determining whether there is in fact a repudiatory breach.
If the repudiatory breach is an anticipatory breach instead of an actual breach then the employer has to demonstrate an intention not to be bound in the future. Notice of termination will probably not be considered an anticipatory breach (as the employer is exercising their lawful contractual rights) but incidents such as notification of a future demotion, loss of salary etc. may constitute an anticipatory breach.
If there is a dispute over what the terms of the contract are then the consequences of such a dispute depend on the temporal effect of the breach. If the consequences of the breach are immediate (i.e. your pay is being reduced unilaterally by your employer with immediate effect) then you may normally safely claim that there has been a repudiatory breach. However, if the consequences are more long-term (i.e. a dispute over commission to be paid at some point in the future) then you may not be entitled to claim this as a repudiatory breach.
Examples of repudiatory breach of contract includes a unilateral variation of the employment terms by the employer (i.e. changing dutires, a significant change in hours, a decrease of salary, a significant change in the location of employment, the imposition of an excessive workload, the maintenance of an intolerable working environment, a failure to address a grievance, the negligent manner in which a disciplinary process is handled, or a demotion). Discrimination may also amount to a repudiatory breach of contract.