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Farrer & Co | Constructive dismissal - really the last straw?

Sometimes a case report pops up in my inbox which prompts me to take a step back and think about that area of law in a wider context, and occasionally reflect on the style of advice I might give on it. 

One such case in the last couple of weeks is the Court of Appeal’s distillation of the principles of the ‘last straw’ doctrine in constructive dismissal in Kaur v Leeds Teaching Hospitals NHS Trust. The claimant claimed constructive dismissal (i.e, resignation in response to repudiatory breach of contract), using as a last straw catalyst the rejection of her appeal against a final written warning. The employment tribunal struck out her claim as having no reasonable prospect of success (the judge could not see that she had any prospect of demonstrating a last straw in relation to the conduct of the appeal hearing - which was the stated catalyst for her resignation), and the EAT rejected the appeal. The Court of Appeal adopted a similar approach but took the opportunity to summarise the correct approach to ‘last straw’ cases, based on the implied term of trust and confidence. In essence:-

“Where an employee claims to have been constructively dismissed, the tribunal should ask the following questions:

1. What was the most recent act (or omission) on the part of the employer which the employee says caused or triggered his or her resignation:

2. Has he or she affirmed the contract since that act?

3. If not, was that act (or omission) of itself a repudiatory breach of contract (i.e entitling the employee to treat the contract as at an end);

4. If not, was it nevertheless a part of a course of conduct comprising several acts and omissions which, viewed cumulatively, amounted to a (repudiatory) breach of [the implied term of trust and confidence]? If it was, there is no need for any separate consideration of a possible previous affirmation;

5. Did the employee resign in response (or partly in response) to that breach?”

In the Kaur case, given that the employer’s disciplinary procedure had been perfectly properly applied, there could be no ‘last straw’, and the appeal failed. The fact that she disagreed with the outcome of the appeal was not sufficient somehow to ‘reactivate’ earlier allegations she had raised 15 months earlier. However, it is interesting to note the Court’s conclusion that if an employee has been subjected to a continuing cumulative breach of contract, she is entitled to rely on the entirety of the course of the employer’s acts, even if she has affirmed the contract along the way. This departs from the EAT’s rather strained view (in an earlier case) that ‘where an employee has affirmed a cumulative breach of the implied term of trust and confidence, the scale does not remain loaded and ready to be tipped by adding another ‘straw’: it has been emptied by the affirmation and the new straw lands in an empty scale’. In the Court of Appeal, Lord Justice Underhill’s pretty logical analysis was that if there is conduct by an employer which is continued by a further series of acts in response to which the employee finally resigns, then he or she should be entitled to rely on the totality of the conduct in order to establish a breach of the implied term. Otherwise it would mean that if an employee fails to object at the first opportunity, he or she will permanently lose the right to rely on all conduct up to that point – which would be unfair. In other words, provided the last straw forms part of a series of acts, it cannot land in ‘an empty scale’ due to a previous affirmation of contract. For those case law geeks among you – the analysis of Lord Dyson in the Waltham Forest case thus remains good law and is to be preferred to that of the EAT in Vaiera.

So what about constructive dismissal in practice? Here are a few collected thoughts on the basic principles, not in any particular order and not (I’m afraid) of any startling profundity.

  • As a starter for ten, remember that an employee needs two years’ service to bring the claim. Obvious, yes, but something which sometimes does get forgotten along the way;

  • It isn’t the same thing as a requirement on an employer always to behave reasonably towards its employees. Yes, the term of trust and confidence goes a long way towards that expectation, but constructive dismissal is more about repudiatory breach – 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 it no longer intends to be bound by one or more of the essential terms of the contract, then the employee may legitimately resign in response to that breach. If she chooses to do so, she must not delay too long in so doing as there is a risk that it will be seen as affirmation of the contract (or alternatively, waiver of the breach);

  • Has a repudiatory breach occurred? Sadly, there is no gold standard test and it is often (unhelpfully) a question of feel – rarely will it be so explicit as a decimation of salary or a removal of significant benefits;

  • Going back to the final straw doctrine, it is clear that the final straw cannot be trivial; does not have to be of the same character as earlier events; doesn’t have to be blameworthy in isolation but cannot be entirely innocuous. Baffled? In practice, I think you won’t go far wrong by hanging on to the principle that as employers if you act in good faith and have good grounds for your actions, your employees will have difficulty in saying that what you’ve done amounts to a last straw for constructive dismissal purposes;

  • Employees can resign in response to anticipatory as opposed to actual breaches – i.e, if an employer shows an intention not to be bound by the contract in the future. There’s some slightly contradictory case law here and employees need to be careful not to jump too soon (and employers can seek to rectify anticipatory breaches which isn’t the case for past breaches), but the principle stands;

  • Breach of the implied term of mutual trust and confidence is of course a very common basis for constructive dismissal arguments, and an equally obvious minefield given the inevitably more subjective analysis it involves. It is useful for employees, though, albeit a high stakes argument – because in law, given the nature of the term, every breach of it by definition goes to the heart of the contract and is therefore repudiatory – the trust cannot be ‘mended’. So whilst it can feel risky for an employee to resign in response to an alleged breach of trust and confidence, if established it is a pretty cut and dried scenario and the employee will almost certainly succeed in her claim. Examples of successful arguments in this sphere include resignation in response to failure to investigate health and safety concerns reasonably, and failure to provide an impartial grievance appeal panel;

  • Intention is irrelevant – you may not have meant to commit a breach of contract, but the test is objective and the circumstances don’t matter. So, even if an employer’s behaviour (e.g in demoting a member of staff) is entirely explicable (eg because of economic pressure), that is not relevant to the question of breach of contract. Similarly, there is no ‘range of reasonable responses’ test – reasonableness (perhaps surprisingly) is not relevant here. In the Court of Appeal’s view, it may be entirely ‘reasonable’ not to pay wages if a major customer defaults on a deal – but that doesn’t stop it being a fundamental breach of contract not to pay;

  • You can’t ‘cure’ a repudiatory breach. Unless waived by the employee or unless they affirm the contract, the employee has a right to choose whether or not to treat the breach as terminal. There’s a whole other piece to be written on affirmation – but in essence, if an employee opts to accept a breach, that acceptance must be unequivocal, communicated to the party in breach or at least, overtly visible (eg by continuing to stay in employment without complaint – though bear in mind that for breaches which don’t have immediate impact, it is risky to rely solely on continued employment);

  • Remember that the employee must resign in response to the breach. This can be surprisingly tricky to determine. Case law suggests that the breach doesn’t have to be the only cause of resignation nor does it have to be a significant or effective cause, but the resignation does need to be in response to the breach – the breach must have ‘played a part’ in their leaving;

  • Often, employers say that because the employee has given notice, it cannot be a constructive dismissal. Certainly, under common law principles, a party who wants to accept a repudiatory breach must resign without notice. But the statutory position is clear that there is an express exception to this principle – the ERA provides explicitly for resignation ‘with or without notice’ (presumably to stop injustice for employees who cannot afford to walk out with immediate effect). Even so, many employees do take a more cautious approach and either resign immediately in order to avoid any argument on the point, or make it very clear that they are giving notice only because they cannot afford not to, and are not, by so doing, affirming the contract.

That’s very much a whistle stop tour, and pretty much any one of these points could merit a blog series of its own. In reality, though, employers should take heart from the fact that in reality very few employees can afford financially to resign and walk out as anything other than an absolute last resort (and they are stymied as far as compensation and causation are concerned if they wait to resign until they have secured alternative work). Of course, that is not carte blanche to behave capriciously or bypass employee rights, but sometimes I think we worry a bit too much about the spectre of constructive dismissal without thinking through the practical implications and pressures on an employee contemplating taking that step. More often, of course, we receive the usual duo of letters from an employee’s representative, setting out openly the alleged breaches and reserving rights, and on a without prejudice basis seeking an agreed exit. That’s a well worn path and can be frustrating – and often, employers will just ride it out and see if the employee ultimately puts their money where their mouth is. But just as commonly a deal is done and honour feels, if not even, then at least as though it has been pragmatically discharged.

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