Constructive dismissal - a change in approach

Constructive dismissal is one of the more common claims considered by employment tribunals. However, a recent decision of the Employment Appeal Tribunal may alter how tribunals approach this issue and, in particular, the test that must be applied by the tribunal when considering whether such a claim has been made out.

June 11, 2009

What is constructive dismissal?

In order to claim constructive dismissal, an employee must resign in response to his employer’s conduct. It follows that such claims are generally difficult for employees to pursue. To succeed in such a claim, an employee must establish, on the balance of probabilities, that:

• his employer committed a breach of an express or implied term of his contract of employment;

• the breach was sufficiently serious to justify the employee’s resigning in response to it, and that the employee did, in fact, resign in response to it; and

• the employee did not “affirm” the contract after the breach had taken place, for example by leaving it too long before he resigned.

For a breach to be “sufficiently serious” to justify dismissal, it must be fundamental – ie, one that goes to the root of the employment contract or that shows that the employer no longer intends to be bound by one or more of the essential terms of the contract.

Breach of the implied duty of trust and confidence

All employment contracts contain an implied duty of mutual trust and confidence. This essentially requires that both employer and employee conduct themselves in relation to the other in a way that does not undermine the trust and confidence that exists between the parties. Often, constructive dismissal claims will be brought on the basis that the employer has behaved in a way that has fundamentally breached that implied duty and that this justifies the employee’s resignation. However, this can be a difficult concept and has generated much case law in the tribunals.

The case law indicates that the tribunal should look at whether the employer had reasonable and proper cause for the conduct complained of and whether this was likely to, or calculated to, destroy or seriously damage trust and confidence. This is therefore a relatively difficult test for the employee to satisfy.

Employment Appeal Tribunal decision

Earlier this month, the Employment Appeal Tribunal clarified the position to be adopted by tribunals when considering this type of claim. In holding that the claimant, who had resigned shortly after alleging a breach of trust and confidence, had not been unfairly dismissed, the Employment Appeal Tribunal set out the following principles:

• Where an employee resigns and claims that he has been constructively dismissed by his employer, the conduct in question must be sufficiently serious as to go beyond unreasonable conduct and must amount to a breach of contract. The Employment Appeal Tribunal rejected the test applied in earlier cases that there could be no fundamental breach if the employer had acted in a way that other employers may have acted in those circumstances; that is, that it acted within a “band of reasonable responses”.

• Where the fundamental breach of contract relied upon is the implied term of mutual trust and confidence, the employee must show that the employer had acted, without reasonable or proper cause, in a manner that was likely to or calculated to destroy the relationship of trust and confidence that should exist between the parties.

• Even where there is a finding of constructive dismissal, an employer may still argue that the dismissal was nevertheless fair. At this stage the “band of reasonable responses” test may be applied.

On the facts of this case, the employee was able to demonstrate that there had been a fundamental breach of contract by his employer. However, his claim ultimately failed because his employer was found to have remedied the breach by upholding the employee’s internal complaint, which it did before the employee resigned.

This case represents an interesting clarification of the principles that should be applied in determining constructive dismissal claims, and reminds us how complex such claims can be.

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