Uncategorized

Constructive Dismissal with Notice

When an employer commits a serious breach of contract that an employee believes undermines their contract common law dictates that they have two choices. They can:

  • Accept the breach and continue working (perhaps because the employees would face destitution if they were not not do so)
  • Resign their employment (making sure they inform the employer of the reasons for the resignation and that it is in response to a breach (see Mruke v Khan).

If they resign then they will have two potential legal claims open to them:

  • A claim of wrongful dismissal
  • A claim claim for constructive (unfair) dismissal

Although often claimed together they are distinct claims, one is a common law claim and the other a statutory claim under the Employment Rights Act 1996.

In this post I want to consider the situation of the employee who is required by contract to give three month’s notice to end their employment and has been subject to a campaign of bullying by their line management. Bullying by an employer is certainly potentially a fundamental breach of the duty of mutual trust and confidence which justifies an employee’s resignation.

If a decision to resign has been made should the employee resign immediately or should they resign with notice? Here the answer, I think, depends on the circumstances.

In the case of Wrongful Dismissal there is a presumption that any resignation must be, if not immediate, very prompt.  The view is summarised in Norwest Holst v Harrison where, in an obiter comment (not representing the decision of the majority of the court), Sir Denys Buckley commented that “[t]he effect of an acceptance of an anticipatory repudiation must, in my view, be the immediate termination of the contract.  By accepting repudiation, the innocent party elects to treat the contract as abrogated at the moment when he exercises his election.” In short, where faced with a fundamental breach of contract the employee wishing to resign in response must resign (i.e., stop working) promptly.

Where they do not stop working an employee risks a Tribunal finding that by continuing to work an employee has ‘affirmed’ the breach and thereby accepted it meaning any further reliance on that breach is impermissible. An example of this can be seen in Simms v Sainsbury Supermarkets Ltd: Sainsburys had refused to pay the claimant the full salary to which she was entitled to which was found to be a fundamental breach of contract that would justify the employee in resigning in response to this. However, the claimant waited several weeks before deciding to resign in response and, because of this delay, the claimant was found to have accepted the breach (the EAT found the contract had been affirmed a mere four weeks after the employer’s decision – see paragraph 32-33). Therefore, the claimant could not succeed in a claim of wrongful/constructive dismissal.

In the context of a wrongful dismissal claim therefore whilst it is difficult to be precise as cases are fact based any claimant seeking to rely on a wrongful dismissal claim should not delay their resignation, and certainly not for more that a couple of weeks. The longer the delay the more likely a Respondent will be able to claim that even if there were a breach that breach has been accepted by the claimant. The employee in our scenario would therefore probably forsake his right to claim wrongful decision if he did not respond promptly to the breach by resigning without notice.

In a constructive (unfair) dismissal case the position is more ambiguous than the normal presumption that a resignation must be “without notice”. Section 95(1)(c) of the Employment Rights Act 1996 sets out that where an employee “the terminates the contract under which he is employed (with or without notice) in circumstances in which he is entitled to terminate it without notice by reason of the employer’s conduct” that dismissal may be unfair. This is important because, in practice, compensation for unfair dismissal is more generous than wrongful dismissal.

The important section of the legislation for the question at hand is the recognition that a claim can be made when the resignation is “with or without notice.” It would seem therefore that where notice is given that an employee resigns and that notice is served then, unlike wrongful dismissal, a claim may still be entertained. The words “with or” were not in the antecedent legislation and were added, says Lord Denning “because it was realised that sub-section (c) as enacted in 1965 left a gap. A man who was considerate enough to give notice was worse off than one who left without notice” (Western Excavating v. Sharp).

Denning continues to provide a statement of the concept of statutory constructive dismissal:

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 the employer no longer intends to be bound by one or more of the essential terms of the contract; then the employee is entitled to treat himself as discharged from any further performance. If he does so, then he terminates the contract by reason of the employer’s conduct. He is constructively dismissed. The employee is entitled in those circumstances to leave at the instant without giving any notice at all or, alternatively, he may give notice and say he is leaving at the end of the notice. But the conduct must in either case be sufficiently serious to entitle him to leave at once. Moreover, he must make up his mind soon after the conduct of which he complains: for, if he continues for any length of time without leaving, he will lose his right to treat himself as discharged. He will be regarded as having elected to affirm the contract.

In the highlighted section therefore Lord Denning seems to accept that notice can be given by an employee with the employee continuing to serve and a statutory constructive dismissal claim being validly made.  Whilst s. 95(1)(c) certainly recognises a worker can claim constructive unfair dismissal if they resign with notice in response to a repudiatory breach I do not read into Lord Denning’s a clear statement that a person who resigns in response to a breach but serves out their contract will not have affirmed the contract, given in a statutory unfair dismissal claim given this is, as Lord Denning himself notes, is still based on contract law. His own summary above concerning the man who may resign with notice is still a person who must “make up his mind soon after the conduct of which he complains: for, if he continues for any length of time without leaving, he will lose his right to treat himself as discharged. He will be regarded as having elected to affirm the contract.”

To date I have still seen no authoritative statement that a person who resigns in response to a fundamental breach of contract but who serves notice will not risk affirmation if they serve their notice – clearly that risk may be higher for a employee with a 12 month contractual notice period compared to an employee with just a week’s notice!

However, the case of Cockram v Air Products Plc, an EAT case, is helpful on this point. In Cockram the claimant believed his contract had been fundamentally breached and he had a contractual notice period of 3 months. However, he in fact gave seven month’s notice to his employer.

Interestingly, given my reservations above it was “common ground that section 95(1)(c) ERA varies the common law contractual principles discussed above for the purposes of a statutory claim of unfair dismissal by giving an employee the right to resign on notice without being treated as having affirmed the contract.” This gives a good ground (although perhaps not impenetrable?) that a person who resigns giving their contractual notice period may still pursue a constructive dismissal claim under the ERA 1996.The judgement further set out that “whereas at common law the giving of any notice to terminate the contract would amount to affirmation of it, under s.95(1)(c), the fact of giving notice does not by itself constitute affirmation.”

The relevance for employee representatives is it is not unknown for an employee to approach a union rep after they have resigned and with no understanding of their own legal rights, and if notice has been worked it a constructive dismissal claim may still be a possibility. 

Given all the parties agreed affirmation could not be found from working contractual notice period the question was whether working more than this still constituted a dismissal. The claimant argued that since s. 95(1)(c) referred to notice and not contractual notice where a longer than required notice period was worked this did not prevent a constructive dismissal claim upon the expiry of that notice being completed.  The argument was given short shrift and found that where a claimant “gives notice in excess of the notice required by his contract, he is offering additional performance of the contract to that which is required by it.  That additional performance may be consistent only with affirmation of the contract” (emphasis added).  Therefore, despite resigning with notice the claimant affirmed the contract by providing more performance than was contractually required and so the unfair dismissal claim was correctly struck out.

In the example above therefore the claimant who responded to bullying by resigning and working out is notice would probably be entitled to pursue a claim of constructive unfair dismissal but, in the circumstances, close attention would be paid to the nature to whether the contract was really repudiated in that period as that may well be a ground of defence a Respondent would put forward.

To me there are a few principles that arise from this case for reps:

  • If a decision is made to resign (and reps should not as a rule be recommending that) then the decision should not be delayed and should be communicated promptly explaining the reasons for the decision.
  • To claim wrongful dismissal a resignation should be without notice but a claim may be made for constructive unfair dismissal is contractual notice was worked.

Cases Referenced:

Cockram v Air Products Plc [2014] IRLR 672

Mruke v Khan [2014] UKEAT 0241_13_2507

Norwest Holst v Harrison [1985] ICR 668

Simms v Sainsbury Supermarkets Ltd [2005] UKEAT 0548_04_0903

Western Excavating v. Sharp [1978] QB 761

Advertisements