WorkLife

Our thoughts on the world of employment law - and beyond.

Constructive dismissal: affirmation of contract

The question of how an employee responds to an alleged repudiatory breach of contract by the employer has long been the subject of judicial scrutiny. The background position, of course, is set out in the Employment Rights Act (ERA) - s 95(1)(c) provides that an employee is constructively dismissed where they terminate their contract “(with or without notice) in circumstances where they are entitled to terminate it without notice by reason of the employer’s conduct”.  Basically, this means where the employer is in fundamental breach of a contractual term - and it is well established that the employee must accept the repudiatory breach and resign in response to it in order to get a claim off the ground. Failure to do so gives rise to the implication that the employee has waived the breach and is treating the contract as ongoing.

 

Under common law principles, an employee who wishes to accept a breach needs to resign without notice, but the ERA provision makes it clear that thee is an option to give notice (which often seems counter-intuitive when arguing fundamental breach - if trust and confidence, say, is said to have been destroyed, how can the employee countenance working out three or six months’ notice?).

 

The EAT has recently looked at these issues in the case of Cockram v Air Products plc UKEAT/0038/14, in which Mr Cockram’s was found to have taken the s95(1)(c) exception a little too far.  He submitted a grievance after a fall-out with his line manager and appealed against the outcome of that grievance.  On receipt of the appeal decision, he remained unhappy and resigned, predictably citing breakdown of trust and confidence.  However, instead of resigning immediately, or giving the requisite three months’ notice specified under his contract, for reasons best known to himself (basically, the need to secure an on-going income whilst looking for a new job) he gave seven months’ notice.   On expiry of that period, he brought a constructive dismissal claim.

 

At a pre-hearing review, the employer applied for strike out of the claim. It argued that Mr Cockram had waived the alleged breach by giving seven months’ notice.  The judge agreed and struck out the case as having no reasonable prospect of success.  The EAT has just reviewed that decision and in so doing, looked at the extent of the statutory variation of the basic principle that resignation should take place without notice in order for the repudiatory conduct to have been accepted.

 

Mr Cockram’s argument was that there was no limit on the length of notice which could be given: the concept of post-resignation affirmation was in his view incompatible with the language of section 95(1)(c). The EAT disagreed.  It found that although section 95(1)(c) operates to vary the common law position that the giving of notice would automatically affirm the contract, whether the contract could in practice be affirmed by the giving of notice was entirely a fact-sensitive issue and in this case, by working a longer notice period than the contract had required, added to and therefore affirmed the contract.  In other words, Mr Cockram had given additional performance of the contract to that which was actually required by it, and hence although an employee is expressly permitted by statute to give notice, that additional performance may be (and here, was) consistent with affirmation of the contract.  Potentially, an employee could under his analysis give many years’ notice and receive many years’ salary, whilst still retaining the right to claim constructive unfair dismissal - and the EAT found this could not possibly have been Parliament’s intention when framing the exception under the legislation.

 

This is a sensible decision and one that gives clarity to employers and employees.  Employers often live in fear of potential constructive dismissal arguments, particularly around the issues of trust and confidence so frequently bandied about by employees and lawyers.  In reality, it remains a pretty tough ask for an employee to bring - and win - a claim of this kind.  First, they have to take the pretty bold step of actually resigning, usually without a job to go to (otherwise they will have mitigated their loss, making the value of the claim somewhat pyrrhic).  Secondly, they have to get over the (high) hurdle of proving fundamental breach and even then, could falter at the final fence if they are found to have affirmed the contract (or in other words, waived that breach).  Often, advisors to individuals suggest that they should give no notice at all in order to avoid any risk of affirming the contract.  Nothing in Mr Cockram’s case changes the fact that the giving of the right contractual notice, consistent with s96(1)(c) should not amount to an affirmation of contract (though query whether the judge’s emphasis on the reason for giving notice - in this case, personal financial security - rather than leaving immediately, may not open the door for arguments as to affirmation even if only contractual notice is given: on the face of it, that seems doubtful). The key point for employees is not to give more than the requisite contractual notice and for employers, to think carefully about how they respond in dealing with notice of any kind given by employees in this type of situation.  For many employees, it will remain a more attractive option to reserve their rights in relation to the breach and continue to work whilst seeking to negotiate a parting of the ways under a settlement agreement.

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