Employment Law e-alert Spring 2019
23 May 2019
In this Spring edition of our e-alert we take a look at 'Constructive Dismissal', how it arises, what legal test the employee must pass and potential claims arising.
What is a constructive dismissal?
In a constructive dismissal situation, there is no express dismissal by the employer; instead, the employee decides to resign because they believe the employer has been in fundamental breach of the employment contract.
Constructive dismissal falls under section 95(1)(c) Employment Rights Act 1996, which states that: "an employee is dismissed by his employer if the employee terminates the contact 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."
What conduct by the employer justifies the employee's resignation?
Constructive dismissal requires the employer to be in repudiatory breach of either an express or implied term of the contract. In the words of Lord Denning in 1978, this means:
"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, then the employee is entitled to treat himself as discharged from any further performance. If he does so, then he terminates the contract by reason of the employer's conduct. He is constructively dismissed."
An employee must, therefore, establish the following for a constructive dismissal case:
- Repudiatory breach by the employer. This may be an actual breach or an anticipatory breach and can also arise from a series of acts, not just a single event. The key is that it must be serious enough to justify the employee resigning.
- The employee must then decide to accept the employer's breach and to treat the contract as at an end – i.e. resign in response to the breach.
- The employee must not delay too long in accepting the breach; otherwise they may have 'waived' the breach and 'affirmed' the contract as continuing.
Implied term of trust and confidence/the 'last straw' doctrine
Whilst a serious breach of an express term of the contract (e.g. non-payment of salary) would clearly form the basis for a constructive dismissal, the most common ground relied upon by employees as justifying their resignation is that the employer has destroyed the implied term of trust and confidence (a term that is implied into all contracts of employment).
This often goes hand-in-hand with the 'last straw' doctrine, which arises where the employee resigns in response to a series of breaches of contract or a course of conduct (e.g. bullying) which, when looked at cumulatively, is sufficient to destroy the implied term of trust and confidence. A breach of trust and confidence will always goes to the root of the contract. Examples might include:
- A failure to implement an impartial grievance hearing.
- Manifestly unreasonable suspension and investigation into disciplinary matters.
- Failing to take reasonably practicable steps to provide a safe system of work.
- Excessive workload causing damage to health.
- A course of conduct amounting to bullying and/or harassment.
As always, each case needs to be considered on its own facts.
Whilst employees may resign on notice in response to an allegation of repudiatory breach by the employer, it is not common they will want (or be prepared) to serve their notice period given the circumstances for their resignation.
As employees tend, therefore, to resign immediately (i.e. without notice), they will have two claims:
- Damages for breach of contract. The most common element of damages is for the net value of their notice period.
- Compensation for (constructive) unfair dismissal. As with unfair dismissal law generally, the employee must have the required length of service (two years) and compensation for lost earnings is limited to the lower of the statutory cap (currently £86,444) or 52 weeks' gross salary.
Employees quite often resign on the spur of the moment, believing that the employer has done something (either a single act or a series of acts) which destroys the relationship (often, without first having raised their complaint(s), either informally and/or formally under the employer's grievance procedure, which will not assist them in any subsequent claim). Employers need to be wary of this situation. If an employee resigns in such circumstances, consider (particularly if they have at least two years' service) inviting them to discuss the issues that have led to their resignation and to reconsider their decision to resign. This will put the employee on the back-foot should they refuse and then bring a claim.
Employment law round up
Increase in claims and Tribunals under pressure
The latest quarterly Employment Tribunal statistics show that between October and December 2018, claims have increased by a further 23% compared to the same period in 2017 and there are no signs of this slowing down. The substantial (and continuing) rise in claims comes after the Government's Tribunal fee regime was abolished after being held to be unlawful by the Supreme Court in 2017. We have noticed that due to the number of claims being lodged and the lack of full-time employment judges, tribunal claims are not being listed until at least 2020. This backlog often results in periods of uncertainty for employers and employees alike, as their cases remain outstanding.
In particular, recent research indicates that disability discrimination claims at Tribunal have increased by 37% from 2017 to 2018. The research considers that stress-induced mental health issues is a primary cause for this rise.
Employers should consider putting in place anti-stress policies and training managers to raise awareness and give them the skills to deal with stress and mental health wellbeing. There are increasing calls for employers to address mental health in particular, with the 'Where's Your Head At?' campaign petitioning the Government to make it a legal requirement for workplaces to have someone trained in mental health first aid.
Many employers will be concerned at the potential risk of facing an Employment Tribunal claim and may wish to put in place some form of protection to cover them against the costs of Settlements, Awards and Legal Fees. Wilsons offers a bespoke employment insurance protection scheme for our clients. We recommend our clients give serious consideration to insuring their exposure to legal costs and compensation awards that might arise in any Tribunal or Court claims brought by employees. Should you wish us to obtain an indicative premium quote please contact the Employment Team.
New Guidance on health and safety for expectant mothers
The Trades Union Congress (TUC) has published guidance on 'Pregnancy, breastfeeding and health and safety' to help employers have the tools to ensure pregnant women and new mothers' needs are being met and risks to their safety are being adequately considered. This is a very useful document for health and safety representatives as it covers a range of areas from physical risks, to mental health considerations and goes into detail about the different actions employers can take to protect staff. A copy of the guidance can be found here.
Dismissal was discriminatory although the employer did not know the employee was disabled until the appeal hearing
In Baldeh v Churches Housing Association of Dudley and District Ltd, Mrs Baldeh was a housing support worker who was dismissed at the end of her 6 month probationary period due to concerns about her performance.
The Tribunal accepted her depression amounted to a disability, but did not uphold her claim, one of the reasons being that her employer did not know and could not reasonably have been expected to know that she was disabled at the time of dismissal.
The Employment Appeal Tribunal (EAT) allowed her appeal on a number of grounds, including that it was arguable her employer had actual or constructive knowledge of the disability before they rejected her appeal.
When considering whether you know or ought reasonably to have known an employee is disabled, you must consider what the you know (or ought to have known) up to the point any appeal outcome is decided.