In this case, the Employment Appeal Tribunal considered whether the Employment Tribunal (Scotland) had erred in law when it dismissed the Claimant’s claim for constructive unfair dismissal.
The law
It is a principle of contract law, that where a contract has been repudiated due to a serious breach by another party, the innocent party can choose whether to accept the breach or affirm the contract.
This principle is transposed into employment law via the concept of “constructive unfair dismissal”. This describes a situation whereby an employer fundamentally breaches an employee’s contract by acting in a manner that is calculated, or likely, to seriously damage or destroy the implied term of trust and confidence (Malik v Bank of Credit and Commerce International SA [1997] (Malik)), entitling the employee to resign from their position in response to the breach and treat themselves as dismissed.
Background
The Claimant had worked for the Respondent as their Commercial Manager for a period of 10 years.
The Claimant resigned and alleged that his employer’s conduct had seriously damaged the implied term of trust and confidence. He raised various anomalies with the disciplinary process, the bullying and intimidating behaviour of his directors (which led to him refusing to attend a meeting with them and resulted in his disciplinary) and alleged that by appointing a Senior Commercial Manager above him during his suspension and subsequent sick leave, he had effectively been demoted by his employer. He lodged a claim in the Employment Tribunal for constructive unfair dismissal.
Decision
The Tribunal dismissed his claim. It acknowledged that there was fault on both sides and, as such, the Tribunal felt that it could not attribute the breakdown entirely to the Respondent.
Indeed, the Tribunal went further and held that even if there had been a fundamental breach of contract, the Claimant’s claim could not succeed because he had affirmed the contract by engaging in the Respondent’s grievance procedure.
The Claimant appealed to the EAT, on the grounds (in particular) that the Tribunal had, by frequently referring to whether the Respondent’s conduct “destroyed” the relationship, rather than “seriously damaged” it, only applied half the legal test prescribed in Malik. The EAT disagreed and dismissed the appeal.
However, on the question of whether the Claimant had, by raising his grievance and/or appealing the disciplinary decision, effectively affirmed the contract (meaning he was not entitled to claim constructive unfair dismissal) the EAT provided some helpful guidance.
It described the contract as a bundle of rights – some of which are mutually dependable and others which are distinct and severable. Reliance on one contractual right (e.g. right to raise a grievance or to appeal against dismissal) does not necessarily signify acceptance that all other contractual rights are intact. Therefore, the EAT affirmed that grievance or appeal decisions are capable of surviving independently even though the remainder of the contract is properly regarded as terminated by the breach.
Comment
The guidance provided by the EAT does seem to be a victory for common sense. After all, successful Claimants who unreasonably fail to raise a grievance before resigning or fail to appeal a disciplinary decision but subsequently lodge a Tribunal claim, can have their compensation reduced by up to 25%. It is unreasonable to expect employees to willfully sacrifice compensation properly due to them, for the sake of being able to exercise their legal rights. It is also unreasonable to deny employers the opportunity to resolve disputes (if possible) before they escalate to litigation.
Even so, it remains the case that any delay by an employee in accepting their employer’s fundamental breach will affect their ability to succeed in a constructive unfair dismissal claim. Swift action following a dissatisfactory grievance/appeal outcome will, therefore, be necessary once the process is over.
