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Introduction to constructive dismissal

Constructive dismissal claims are notoriously hard to successfully claim as the burden lies with the employee to prove that they were entitled to resign from their role following a repudiatory (fundamental) breach of contract by their employer. In other words, an employee is entitled to resign and treat themselves as being dismissed by virtue of their employer’s conduct.

The main avenue for employees to pursue and illustrate a breach by an employer is through a breach of the implied term of mutual trust and confidence. Some broad examples of such situations include an employer: unilaterally changing an employee’s salary; changing the duties of an employee, subjecting the employee to discrimination or creating an intolerable working environment for the employee e.g. consistent bullying.

An employee is required to communicate their acceptance of their employer’s repudiatory breach and treat themselves as dismissed. Ordinarily, this is done through the act of resignation but a recent case has developed the stance of communicating such acceptance and extended it to situations where someone fails to return to work following an extended period of absence.

Case update – Constructive dismissal claim

In Chemcem Scotland Ltd v Ure, the EAT has held that an employee’s failure to return to work following maternity leave was sufficient to communicate her acceptance of her employer’s repudiatory breach of contract for the purpose of claiming constructive dismissal.

Background facts

Mrs Ure (U) had been employed by her father’s company BRE Ltd (BRE). BRE had encountered some financial difficulties and was on the verge of insolvency before its employees, including U, were transferred to Chemcem Scotland Ltd (CS) of which, U’s father was a majority shareholder.

U had started her maternity leave and was having ongoing discussions with her father about her employment with CS. During this time, U’s father was going through divorce proceedings with U’s mother, and had also began a relationship with another member of CS’s staff. Due to these ongoing circumstances, the relationship between the two was deteriorating. As a result, U’s father failed to adequately inform and, in some cases, misled U in relation to information regarding her employment with CS which, as an employee of CS, she was entitled to be informed about.

At the end of her maternity leave U did not return to work for CS and instead claimed she had been constructively dismissed, relying on her father’s treatment during her maternity leave to establish CS had breached the implied duty of trust and confidence in her contract of employment.

Employment Tribunal (ET)

An ET agreed with U, citing various acts during her maternity leave that contributed to a breach of the implied duty of trust of confidence which constituted a repudiatory breach of U’s contract. These events included the following:

• CS putting U onto BRE’s payroll when it was on the verge of insolvency;
• CS’s failure to pay statutory maternity pay on time without explanation; and
• CS’s failure to answer U’s queries about her entitlements.

The Tribunal ruled that these acts indicated that her father was hostile to the idea that U’s employment would be continuing and this could be evidenced over a significant period of time, as such, this entitled U to treat herself as dismissed and claim constructive dismissal.

CS appealed the decision, citing that U had not actively communicated her acceptance of the breach to CS and therefore there had not been a termination of U’s contract.

Employment Appeals Tribunal (EAT)

The EAT dismissed CS’s appeal, given the facts and circumstances of the case, it was clear that U’s failure to return to work was sufficient to constitute an implied acceptance to CS’s repudiatory breach. The EAT also highlighted that it was a matter of fact for the Tribunal to decide whether U’s failure to attend work could be seen as an acceptance to the breach.

Consequences of the decision

At first glance, the decision can be seen as a relatively major development in the law of constructive dismissal – employees have the possibility of bringing a claim even where they have not actively resigned from their role, they have simply not returned to work following an employer’s conduct which can be seen as an implied acceptance of an employer’s breach.

However, most commentators are likely to agree that the facts of the present case were unique in nature and, therefore, any future claims of constructive dismissal are still likely to require a resignation to communicate their acceptance of an employer’s breach – although this case still represents an interesting development of the law. As with the majority of constructive dismissal claims, the particular facts in question will be crucial in determining the likelihood of success.

Comment on affirmation of a contract when resigning and claiming constructive unfair dismissal

One additional closing point to note is that whether or not an employee has affirmed a breach of the contract can be key to the success or failure of these types of claims. The general principle is that if one party commits a repudiatory breach of the contract, the other party can choose either to affirm the contract and insist on its further performance, or accept the repudiation, in which case the contract ends. The innocent party must at some stage choose one of these options and cannot leave it open ended indefinitely. If they affirm the contract, even once, then they will have waived their right to accept the repudiation and therefore as an employee would lose the right to bring a claim for constructive unfair dismissal. The longer an employee waits before making a decision or resigning the harder it is likely to be for them to argue they had not affirmed the contract. This is why normally in a constructive unfair dismissal scenario the employee will resign without notice claiming a fundamental breach of contract, to avoid an argument they affirmed the contract by working their notice or delaying their decision.

This point was considered in the case of Cockram v Air Products plc. Mr Cockram was in a senior position earning a large salary. He raised a grievance and was unhappy with the outcome. His contract required him to give three months’ notice to terminate his employment. Mr Cockram resigned from his employment on 25 July 2012. He claimed that the grievance outcome was a fundamental breach of his contract entitling him to resign. However, despite this he gave seven months’ notice on the basis that “he needed to work for a reasonable period”. He subsequently brought a claim for constructive unfair dismissal. The claim was struck out at a pre-hearing review on the grounds of having no reasonable prospect of success. Mr Cockram appealed.

The EAT dismissed his appeal on the basis of affirmation. It was decided that it was immaterial when affirmation of the contract took place i.e. pre or post resignation. The factors to be considered were the length of notice given and the reason why he would agree to continue to perform under the employment contract. It is essentially a fact-sensitive analysis. The Judge confirmed that offering to work an additional four months’ notice, solely for his own financial gain, had the effect of affirming the contract. Her could therefore no longer rely on any alleged breach by his employer and wouldn’t succeed with a constructive unfair dismissal claim.

The learning point from this case is simple. When faced with an employee’s resignation referring to an alleged breach of contract, an employer should always take note of whether the employee has taken any steps which could be argued to affirm the breach. This could include whether or not they resign with notice, whether they accept further pay before making a decision to resign, whether they make further complaints and whether they try to negotiate changes to their role before they resign. If they have, its then important to consider the reasons for any decisions or delay and whether or not this is likely to mean that they had not affirmed the breach.

In summary constructive unfair dismissal cases remain difficult to succeed in but these cases are a useful reminder that there are several nuances within the legal tests and each individual case must be assessed on its merits.

If you have any questions or would like any assistance in respect of a constructive dismissal issue please get in touch with a member of the Employment team.