Constructive dismissal (2): Unfair dismissal, redundancy payments and discrimination
An examination of constructive dismissal in the wider context of statutory employment protection claims.
"Although it will be more difficult for an employer to say that a constructive dismissal was fair, nevertheless ... there may well be circumstances where it is perfectly possible to do so."
(per Lord Justice Waller in Savoia v Chiltern Herb Farms Ltd)
In the first of two guidance notes on constructive dismissal (Constructive dismissal (1): general principles and specific terms), we examined what factors need to be established in order for an employee to prove that he or she has been constructively dismissed (see the box below for a useful reminder). This second feature focuses on constructive dismissal within the wider framework of unfair dismissal complaints, and also touches briefly on redundancy payments and discrimination issues.
The dismissal - constructive or express?
Before moving on to look at the various issues that arise in relation to the different elements of an unfair dismissal claim in the context of constructive dismissals, it is worth mentioning that, in certain cases, what at first glance might appear to be a constructive dismissal may, in fact, be an express dismissal by the employer.
Section 95(1)(a) of the Employment Rights Act 1996 ("the ERA") describes such a dismissal as occurring when "the contract under which [the employee] is employed is terminated by the employer ...". In Hogg v Dover College, the EAT emphasised that the focus in this context is the contract, not the relationship of the employer and employee. So, if a particular employment contract is terminated, there will be a dismissal even if the employee remains employed by the employer under a new contract. On the facts of Hogg, the EAT was of the opinion that where the employer had sought to impose radically new terms and conditions of employment without the employee's consent, this amounted to a complete withdrawal of the contract and the offer of a new, radically different contract. There had thus been an express dismissal.
This concept was endorsed in Alcan Extrusions v Yates and others . In that case, the employer unilaterally imposed a continuous rolling shift system in place of the traditional shift system provided for in the contract of employment. The EAT said that "the new terms were so radically different from the old as to pass beyond mere repudiatory variation of the old contract, so that they could properly be characterised as the removal of the old contract and the offer, by way of substitution, of a new and substantially inferior contract". The EAT went on to say that the test was objective and a matter of fact and degree for the tribunal. It would not be appropriate, the EAT said, to lay down any hard-and-fast rules.
Most recently, the EAT in London Borough of Southwark v Mungol said that the question, "Was the old contract being withdrawn or removed?", must be answered with a recognition that a departure from a former contract may be so substantial as to amount to its withdrawal or, alternatively, may be regarded as a variation of contract, which may or may not constitute a repudiatory breach of contract.
It is of practical importance to establish the difference between an express dismissal and a repudiatory breach in these circumstances. An employee must accept a repudiatory breach before it can give rise to a constructive dismissal, and consequently runs the risk of affirming the contract. An express dismissal, by contrast, takes effect notwithstanding any actions of the employee.
UNFAIR DISMISSAL
The general qualifying conditions and procedural rules that apply to unfair dismissal claims under Part X of the ERA apply whether a claim has been based on an express or a constructive dismissal. Once the claim has been brought, the same substantive conditions must be satisfied for it to be successful. For a basic summary, see the box on p.16.
The effective date of termination
It is important to identify the effective date of termination ("the EDT") in order to calculate the length of an employee's qualifying service and to determine whether or not a claim has been brought in time. It is also relevant in calculating the basic award of compensation in a successful claim. Identifying the EDT gives rise to some peculiarities in respect of constructive dismissals, given that it is the employee rather than the employer who has terminated the contract of employment.
Section 97(1) of the ERA states that the EDT "in relation to an employee whose contract of employment is terminated by notice, whether given by his employer or by the employee, means the date on which the notice expires". Thus, where an employee resigns on notice in response to a repudiatory breach, the EDT will be the date of expiry.
What, however, of the more usual case of the employee who resigns without notice and claims that he or she has been constructively dismissed? Section 97(1)(b) of the ERA states that in relation to an employee whose contract of employment is terminated without notice, the EDT will be "the date on which the termination takes effect". In BMK Ltd and another v Logue, the EAT confirmed that this subsection applies equally to cases of constructive and express dismissal.
When does a termination take effect?
The answer is one of fact to be decided in light of all the circumstances of a particular case, and does not necessarily equate to the date on which an employee accepts a repudiatory breach of contract.
In Logue itself, the employee was a director of two companies and was employed as chairman and chief executive. His directorships were removed in repudiatory breach of contract and he became aware of that fact no later than 17 March 1992. However, he was unclear as to the effect this would have on his employment until he received a letter on 18 March, from which he understood that he could not carry out his employment obligations without being a director. He subsequently accepted the repudiatory breach. The EAT was faced with the issue of deciding whether or not the employee's application for unfair dismissal was out of time. If the EDT was found to be any date after 17 March, the claim was in time; if not, it was time-barred.
The EAT considered whether or not the EDT had to be the date on which the repudiatory breach was accepted by the employee and concluded that it did not. It noted that academic debate still surrounds the issue of whether or not a summary dismissal or unequivocal walkout by the employee brings the contract of employment to an end at that point or whether such events merely constitute repudiatory breaches that must be accepted by the innocent party before the contract terminates.
However, in Robert Cort & Son Ltd v Charman (cited by the EAT in Logue), the EAT held that, even assuming that the latter view is correct, the EDT remains the date of "actual" dismissal rather than the date of later acceptance, as the employment relationship is effectively at an end at the point of summary dismissal by the employer (emphasis added), notwithstanding the fact that legally the contract is still subsisting. The subsistence of the contract merely gives an employee a right in damages.
Following what it regarded as this general principle in the context of a purported constructive dismissal, the EAT in Logue held that the termination took effect on the removal of the employee's directorships as this rendered it impossible for the employment to continue, effectively bringing it to an end. The application was out of time.
Date of acceptance of breach remains the norm
It should, however, be noted that Logue was a rare case where the repudiatory breach effectively made future performance of the contract impossible. The EAT in that case stated: "We can well imagine that there might be circumstances where there was what amounted at the end of the day to a repudiatory breach on one side or the other which did not when analysed bring about the termination, effectively, of the relationship of employer and employee." In those circumstances, the EDT may well equate to the date of acceptance of that breach.
This was also noted by the EAT in Edwards v Surrey Police, where it commented that it is not an infrequent occurrence that employees find their working lives intolerable, walk out "in a huff", but do not intend to bring their employment relationship to an end. Equally, in situations where an employer is trying to impose a unilateral variation of contract that amounts to a repudiatory breach, the employment relationship is not effectively over until the employee indicates that he or she accepts that breach.
In Edwards, the EAT (under its then President, Mr Justice Morison) upheld the proposition that the statutory definition of the EDT is not to be surrounded by the subtleties of the law of contract. However, it went on to say that as a matter of general principle, before a contract of employment can be terminated there must have been a communication by words, or by conduct, such as to inform the other party to the contract that it is indeed at an end. The EAT stated that there was nothing in Logue that conflicted with this view; in that case, the employee was aware of the removal of his directorships albeit that he did not know that such removal would bring his contract of employment to an end.
It is submitted that the view expressed in Edwards is representative of most cases of unfair constructive dismissal, with Logue serving as a reminder that only very rarely in cases of constructive dismissal will the EDT possibly not accord with the strict contractual position requiring communication of acceptance. This reflects the approach taken to this issue in the overwhelming majority of cases both before and after Logue, in which the emphasis has been on identifying the first indication of an employee's "unambiguous acceptance" of a repudiatory breach (see, for example, Vose v South Sefton Health Authority). As the EAT in Vose observed, an employer cannot in principle dictate the timing of an employee's acceptance, for example, by insisting that the employee perform an act that is inconsistent with his or her contract by a specified date.
Moreover, it would seem to be at least arguable that the situation in Logue could, and perhaps should, have been treated as an express summary dismissal by the employer, on the basis that it amounted to a complete withdrawal of the existing contract under the principles expounded in Hogg v Dover College and related cases (see p.14 above).
Agreeing the EDT
Although at first sight it may seem strange that, at least according to Logue, the EDT may on occasion occur before the date on which a repudiatory breach is accepted, as without such acceptance there can be no constructive dismissal, it is important to reiterate that the test is one of fact.
By way of further example, it has been held that the parties can retrospectively agree the EDT, even if the chosen date falls in a period during which the contract was still subsisting. This was first established in relation to constructive dismissal in Crank v Her Majesty's Stationery Office and followed in Corby Borough Council v Barratt . More recently, the principle was upheld in general terms in Lambert v Croydon College.
Postponing the EDT
Finally, for the purposes of calculating qualifying service and the basic award of compensation (but not for the purposes of determining the three-month time period for bringing a claim), if the employee resigns without notice or on shorter notice than the statutory minimum notice provided for by s.86 of the ERA, the EDT will be postponed by the length of the minimum statutory notice period required, running from the date on which the employee resigned (ss.97(4) and (5) of the ERA).
Establishing reason for dismissal
If an employee successfully proves that he or she has been constructively dismissed, this does not automatically mean that the dismissal was unfair. Once the dismissal has been proved, tribunals must go on to consider whether or not the dismissal was for a potentially fair reason under s.98(1) and (2) of the ERA, and whether or not the employer acted reasonably in treating that reason as sufficient grounds for dismissal (Stephenson & Co (Oxford) Ltd v Austin; Savoia v Chiltern Herb Farms Ltd). A tribunal that fails to do so will err in law.
Although it may appear somewhat artificial for the employer to have to prove a reason for dismissal in circumstances where it is the employee who actually brings the contract to an end, the Court of Appeal in Delabole Slate Ltd v Berriman confirmed that the statute requires the employer to show the reasons for its conduct that entitled the employee to terminate the contract and thereby gave rise to a deemed dismissal by the employer.
Therefore, it is important for employers to ensure that there is evidence before the tribunal to allow it to consider whether the circumstances amount to a potentially fair reason to dismiss. In Avery Label Systems Ltd v Bannister, the EAT refused to allow the employer to raise before it an argument that it had had a fair reason to dismiss, on the basis that it had not previously raised that argument before the employment tribunal despite having the benefit of legal representation.
Reasonableness and fairness
Once the employer has succeeded in showing that it had a potentially fair reason for the constructive dismissal, the tribunal will move on to consider whether dismissal was a reasonable response under s.98(4), in the same way as in any other unfair dismissal claim. It will thus apply the test laid down by the EAT in Iceland Frozen Foods Ltd v Jones, namely whether the decision to dismiss the employee fell within the band of reasonable responses that a reasonable employer could have adopted, albeit in the slightly strained context of the employee terminating the contract.
It is thus immediately apparent that the test is in complete contrast to the strict contract test that applies to establishing a constructive dismissal in itself (although see the reference in the first part of this Guidance Note to the blurring of this distinction - Constructive dismissal (1): general principles and specific terms).
The case of Farrant v The Woodroffe School illustrates this dichotomy. In that case, an employee was dismissed for refusing to obey an instruction to work to a new job description. The employer genuinely, though mistakenly, believed that it had the lawful, contractual power to give that instruction. The employee brought a claim for unfair dismissal. The EAT upheld the finding of the employment tribunal that the dismissal had been fair. In doing so, it observed that the test for constructive dismissal was strictly contractual, to which the terms of the contract and breach of those terms were of utmost importance. In contrast, where the employer relies upon a refusal to obey an instruction, the lawfulness of the instruction will be relevant to, but not determinative of, the fairness of the dismissal.
Redundancy
An employer who constructively dismisses an employee may be able to show that the reason for this dismissal was "redundancy". This concept is defined for unfair dismissal purposes by reference to the definition contained in the redundancy payment provisions of Part XI of the ERA (see s.139).
By way of example, in Bass Leisure Ltd v Thomas, the employer constructively dismissed the employee by requiring her to move her place of work in breach of contract, following the closure of the depot in which she was based. This dismissal, albeit constructive, was found to be by reason of redundancy. Since the case concerned a "pure" redundancy payment claim under Part XI (see further pp.19-20 below), however, no question of the fairness or otherwise of the dismissal arose.
Conduct
A constructive dismissal can be on the grounds of the conduct of the employee and also be fair.
An example of the process that an employment tribunal must go through in such cases can be seen in Bromley Hospitals NHS Trust v Mair . Following an incident in which the employee directed racial verbal abuse at a colleague, the employer invoked disciplinary proceedings. As a result, it imposed a fixed-term contract upon the employee that amounted to are pudiatory breach of contract. The employee accepted that breach and was constructively dismissed. The tribunal found that this dismissal related to the employee's conduct but was unfair.
The EAT overturned this decision on the basis that the tribunal had treated the repudiatory breach as evidence that the dismissal had been an unreasonable response on the part of the employer. This was an error of law. The EAT held that the question of whether or not the employer was in repudiatory breach was relevant only to the issue of dismissal. Having found that the reason for the dismissal was the employee's conduct and that the dismissal satisfied the reasonableness test, the tribunal should have found that the dismissal was fair.
Business reorganisations
It is often the case that an employer decides to reorganise its business, introducing changes to the terms and conditions of employment of existing employees. As a matter of contract law, contracts cannot be lawfully varied without the consent of both parties. Consequently, an employer may resort to dismissing an employee who refuses to consent to the new terms. Alternatively, if the employer imposes the new terms without consent in fundamental breach of contract, the employee may resign in response and claim to have been constructively dismissed. The question then is whether the dismissal, constructive or otherwise, is fair.
The catch-all category of potentially fair reasons for dismissal is generally known as "some other substantial reason" ("SOSR") for dismissal. If an employer can prove it had a sound, good business reason for reorganising its business, this can constitute SOSR for the dismissal of an employee who refuses to accept changes to his or her terms and conditions of employment (see, for example, Hollister v The National Farmers' Union).
Once the employer has shown that it had a sound, good business reason for are organisation involving changes to terms and conditions, the test of reasonableness must be applied. This is the same test whether the dismissal of the employee is express or constructive (Dickens Ltd v Broadbent).
The general principles that apply to the test of fairness in the context of business reorganisations are as follows.
The starting point is the words of the statute, which ask whether the employer acted reasonably or unreasonably in treating the reorganisation as a sufficient reason for dismissing the employee (or for imposing the new terms, thereby inducing the constructive dismissal). It is an error of law simply to ask whether the new terms were those that a reasonable employer would offer (St John of God (Care Services) Ltd v Brooks and others).
Where the employer has established that it had a sound, good business reason for the reorganisation, the reasonableness of the dismissal must be considered in the context of that reorganisation (St John of God (Care Services) Ltd applying Hollister).
There is no principle in law that if new terms of a contract of employment are much less favourable to an employee than the terms of the old contract, the dismissal will be unfair unless the business reasons are so pressing that it is vital for the survival of the business that the new terms are accepted (Catamaran Cruisers Ltd v Williams and others ).
The tribunal must examine the employer's motives in making the new offer and ensure that the terms are not being imposed for arbitrary reasons (Catamaran Cruisers Ltd).
The tribunal must consider the viewpoint of both employer and employee (Catamaran Cruisers Ltd; Shevlin v Coventry Free Church Homes for the Aged). It may be that the employer's legitimate interests and the employee's equally legitimate interests are irreconcilable (St John of God (Care Services) Ltd).
Whether a trade union has recommended acceptance of the new terms is relevant (Catamaran Cruisers Ltd).
The number of employees who have accepted the new terms is relevant (Catamaran Cruisers Ltd; St John of God (Care Services) Ltd).
Reasonableness or contract?
In the context of a reorganisation, the case of Genower v Ealing, Hammersmith & Hounslow Area Health Authority illustrates in the same way as Farrant (see above at p.17) that an employer can act unlawfully and constructively dismiss an employee in circumstances that may nonetheless be fair under s.98(4).
In Genower, the EAT said that "the matter is not concluded on the test of fairness by a decision that there has been a fundamental breach on the part of the employer". The employee had been constructively dismissed following the employer's attempt to change the employee's job duties and place of work following a reorganisation. The employer had established SOSR for the dismissal, in that the reorganisation was necessary to prevent a serious adverse effect on the business. Applying the test of reasonableness, the tribunal had been satisfied that the employer had good reason for moving staff around and had adopted a fair procedure. The employee had been given a full explanation of the need for the changes and had been treated in a "kindly" way. There had also been a full consideration of his position. His dismissal was, therefore, fair (see the box above right for contrary examples).
The recognition that an employer is entitled to reorganise its own business and is able fairly to dismiss an employee for refusing to accept changes to terms and conditions, even in circumstances where the employer has acted in fundamental breach of contract and constructively dismissed the employee, erodes the protection given to employees by contract law and the development of the implied term of trust and confidence. So much so that, in St John of God (Care Services) Ltd, the lay members of the EAT were concerned enough to state that "the fact that an employer is not restricted, when offering new terms and conditions, to a situation where the survival of his business is at stake, does not provide an open door to change".
However, it remains true to say that employees faced with changing terms as a result of a reorganisation may find greater protection in a common law claim for wrongful dismissal (ie dismissal in breach of contract) than under the unfair dismissal legislation, unless the reorganisation is related to the "transfer of an undertaking" (see below).
Automatically unfair constructive dismissal
It must be remembered that the reasons for dismissal designated by statute as automatically unfair (see the box on p.16 for the full list of such reasons) apply equally to constructive dismissals.
Thus, in Bass Taverns Ltd v Burgess , an employee shop steward demoted by his employer for making disparaging remarks about the employer during a trade union presentation was found to have been constructively dismissed. This dismissal was automatically unfair because it related to his trade union activities under s.152 of the Trade Union and Labour Relations (Consolidation) Act 1992.
Similarly, in Goodwin v Cabletel UK Ltd, the constructive dismissal of an employee on grounds relating to health and safety was found to have been automatically unfair under what is now s.100(1)(a) of the ERA.
Transfer of undertakings
The Transfer of Undertakings (Protection of Employment) Regulations 1981 ("the Regulations") purport to implement the EC Business Transfers Directive1, which was drafted with the purpose of protecting the rights of employees when the identity of their employer changes following the sale, or transfer, of the business or undertaking for which they work. For the purposes of this Guidance Note, it is important to note that the Regulations apply equally to all employees who are constructively dismissed in connection with a transfer and to employees expressly so dismissed by either the transferor or transferee.
Regulation 5(1) provides for the automatic transfer from the transferor to the transferee of the contracts of employment of those employed in the undertaking or part of the undertaking transferred. This principle is, however, qualified by reg. 5(5), which expressly preserves "any right [of the employee] apart from these Regulations to terminate his contract of employment without notice if a substantial change is made in his working conditions to his detriment".
In Delabole Slate Ltd v Berriman, the Court of Appeal confirmed that, although the right to claim constructive dismissal is thus preserved by reg. 5(5), the question of fairness falls to be decided under reg. 8. Under the latter regulation, where the reason or principal reason for dismissal (or, in the context of a constructive dismissal, the reason for the conduct entitling the employee to terminate the contract without notice) is the transfer or a reason connected with it, the dismissal will automatically be unfair (reg. 8(1)), unless the employer had an "economic, technical or organisational reason entailing changes in the workforce", in which case the dismissal falls to be tested by the standard unfair dismissal test of fairness under s.98(4) of the ERA (reg. 8(2)).
Berriman is authority for the principle that the phrase "changes in the workforce" in reg. 8(2) will normally involve a reduction or change in the number of persons employed, although in Crawford v Swinton Insurance Brokers Ltd, the EAT held that there can be a change in the workforce if the same people are kept on but given entirely different jobs to do.
Accordingly, it is clear that employees facing a reorganisation related to the transfer of an undertaking are in a far stronger position than their counterparts facing a reorganisation unrelated to such a transfer. A unilateral variation of terms and conditions resulting from a desire to harmonise employment terms following a transfer may well give rise to an automatically unfair constructive dismissal. And a variation may be related to the transfer even if it occurs several years after the transfer has taken place (see, for example, Taylor v Connex South Eastern Ltd , where changes were found to be transfer-related some two years after the event).
Separate test to be applied in transfers cases
Moreover, constructive dismissal in the context of the Regulations need not involve a breach of contract. In Rossiter v Pendragon plc , the EAT confirmed that the preserved right under the ERA to claim unfair constructive dismissal had to be interpreted in light of European law in the context of the transfer of an undertaking.
The EAT noted that the ECJ in Merckx and another v Ford Motors Co Belgium SA required member states to provide that where a contract of employment is terminated because the transfer involves a substantial change in working conditions to the employee's detriment, the employer is to be regarded as having been responsible for the termination. The Business Transfers Directive does not refer to a breach of contract. The EAT in Rossiter thus held that "the wording of s.95(1)(c) [of the ERA] is sufficiently wide to bear a construction which does not require the employer's actions complained of to constitute a breach of contract".
Objecting to the transfer
The final point in relation to transfers is that an employee exercising his or her legal right to object to being transferred to the new employer under reg. 5(4A) does not thereby lose the right to claim constructive dismissal against the transferor if the transfer would involve a substantial change in his or her working conditions to his or her detriment.
This is because the Court of Appeal in University of Oxford v Humphreys and another held that reg. 5(5) (preserving the right to claim constructive dismissal broadly defined) overrides reg. 5(4B), which states that, where an employee objects to being transferred, the transfer will operate so as to terminate his contract of employment "but he shall not be treated, for any purpose, as having been dismissed by the transferor". To hold otherwise would not give effect to the purpose of the Business Transfers Directive in safeguarding the rights of employees in the context of a transfer. The transferee escapes liability on the basis that the objection prevents the automatic novation of the contract of employment and the transfer of related rights and obligations in relation to the employment relationship that would otherwise take place under reg. 5(1) and (2).
Unfair dismissal compensation
Compensation for unfair dismissal consists of both basic and compensatory awards (see s.118 of the ERA). The amount of the basic award, calculated according to a statutory formula, may be reduced if the employee unreason-ably refuses an offer of reinstatement (s.122(1)). Similarly, the larger compensatory award may be reduced according to the normal contractual principles of mitigation of loss (s.123(4)).
The EAT in Parkes v Banham Patent Locks Ltd held that the identical predecessors to these subsections applied equally to cases of constructive dismissal and cases of express dismissal. In Parkes, an employee who had been constructively dismissed refused an offer to reinstate him but, critically, said that he would have been willing to work for the employer in a self-employed capacity which, the tribunal held, would have been "indistinguishable" from working in an employed capacity. Thus, the refusal was not linked to the prior repudiation of contract and the tribunal was justified in reducing both the basic and compensatory awards to nil.
Reductions for contributory fault
Both the basic and compensatory awards can also be reduced for contributory fault on the part of the employee (ss.122(2) and 123(6) respectively). These subsections have similarly been found to apply to cases of constructive dismissal (Morrison v Amalgamated Transport and General Workers' Union).
In Morrison, the Court of Appeal of Northern Ireland held that the three concepts of constructive dismissal, unfair dismissal and contributory fault are distinct, each requiring separate consideration and decision at a different stage in an unfair dismissal claim. A finding of contributory fault may be rare in a case of constructive dismissal, as "whenever [a tribunal has] found unfair constructive dismissal [it] will necessarily have found a totality of unjustifiable and unreasonable conduct on the employer's part". However, it was an error of law to hold that exceptional circumstances must be shown before a finding of contributory fault could be made.
On the facts of Morrison, the Court concluded that there was "abundant evidence to justify the tribunal's finding of blameworthy conduct by [the employee] and that that contributed to her dismissal". The conduct in question (which was quantified by the tribunal as making a40% contribution to the dismissal) primarily took the form of a wilful and persistent refusal to comply with a lawful instruction from her employer, without which she would not have been suspended without pay or subjected to conditions being placed on her possible return to work (those actions by the employer comprising the repudiatory breach of contract on which her constructive dismissal claim was based).
This approach was followed by the EAT in Polentarutti v Autokraft Ltd. In that case, the employee had been constructively dismissed as a result of the employer's decision not to pay him for some overtime work he had carried out. However, the employer's decision was made in response to an inspection that found that, of 24 hubs the employee had worked on, 23 were defective, and a finding of contributory fault was made accordingly. In upholding this decision of the tribunal, the EAT confirmed that a reduction could be made for contributory fault even where the employer had failed to show the reason for the conduct leading to the constructive dismissal.
REDUNDANCY PAYMENTS
Section 135 of the ERA gives to employees the right to a redundancy payment if, inter alia, they are "dismissed by the employer by reason of redundancy". Dismissal for these purposes is defined in the same terms as in unfair dismissal claims (s.136(1) of the ERA) so that an employee who is constructively dismissed by reason of redundancy may qualify for a payment (see p.17 above).
For the purposes of calculating the payment and length of qualifying service, it is necessary to identify the "relevant date", which is defined in identical terms as the EDT (s.145(2) of the ERA). There is, however, no postponement of the relevant date in situations where the s.86 minimum notice period has not been given, in contrast to the position in relation to unfair dismissal (see above at p.16). The six-month time period in which claims for a redundancy payment must be brought under s.164 of the ERA starts to run from the relevant date.
DISCRIMINATION CLAIMS
Claims under the Sex Discrimination Act 1975 ("the SDA"), the Race Relations Act 1976 ("the RRA") and the Disability Discrimination Act 1995 ("the DDA") can be brought by employees against their employers if, inter alia, the employer discriminates against the employee on the relevant prohibited grounds by "dismissing [the employee] or subjecting [the employee] to any other detriment" (s.6(2)(b) of the SDA; s.4(2)(c) of the RRA; s.4(2)(d) of the DDA).
What, then, is meant by "dismissing" the employee in the context of the discrimination legislation?
Sex discrimination
Section 82(1A)(b) of the SDA expressly incorporates termination of the contract by the employee "in circumstances such that he is entitled to terminate it without further notice by reason of the conduct of the employer". In other words, a constructive dismissal expressly falls within the definition of dismissal for the purposes of the SDA, notwithstanding the fact that the conduct giving rise to the fundamental breach may well also amount to "some other detriment".
Race discrimination
However, neither the RRA nor the DDA expressly encapsulates the concept of constructive dismissal in the meaning of dismissal (which, indeed, remains generally undefined in those Acts).
This was highlighted in relation to the RRA in Harrold v Wiltshire Healthcare NHS Trust. The employee resigned on notice following the promotion of a white employee. She brought her claim more than three months after the promotion had taken place but within three months of her own last day of employment. Thus, if the unlawful act was found to be the promotion, her claim was out of time; if it was the constructive dismissal, the claim was in time.
The EAT found that a constructive dismissal was not a dismissal for the purposes of the RRA. It stated that the proper analysis was that "the underlying racially discriminatory behaviour, leading an employee to resign in circumstances amounting to constructive dismissal for the purposes of unfair dismissal and sex discrimination legislation, amounts to some other detriment under s.4(2)(c) of the [RRA]. It is not a dismissal within the meaning of that provision." This meant that the employee's claim was out of time.
More recently, however, in Derby Specialist Fabrication Ltd v Burton , the EAT chose not to follow Harrold, on the basis that whether an employer deliberately dismisses an employee on racial grounds or acts so as to repudiate the contract by racially discriminatory conduct, which repudiation the employee accepts, the end result is the same; namely, the loss of employment by the employee. Thus, a constructive dismissal is implicitly contained within the meaning of dismissal in the RRA.
Disability discrimination
Since Burton, it had widely been assumed that the same reasoning would apply by analogy to the DDA.
Unfortunately, the EAT has now held that the constructive dismissal of an employee does not amount to "dismissing" him or her within the meaning of s.4(2)(d) of the DDA (Commissioner of Police of the Metropolis v Harley ). As it had done in Harrold, the EAT in Harley highlighted the fact that Parliament had expressly chosen not to include constructive dismissals in that context in the DDA, in contrast to the SDA, which was amended so as expressly to include such dismissals.
With conflicting authorities on the issue, it will be for the Court of Appeal conclusively to determine the matter. It is of note, however, that the decision in Burton was not cited to the EAT when it made its decision in Harley.
1Council Directive 77/187/EEC on the approximation of the laws of the member states relating to the safeguarding of employees' rights in the event of transfers of undertakings, businesses or parts of undertakings or businesses. This is now consolidated, together with amendments, in Council Directive 2001/23/EC of 12.3.01 (see London Borough of Southwark v Mungul).
Constructive dismissal - a brief reminder
In order to prove that he or she has been constructively dismissed, an employee must show that:
the employer was in actual or anticipatory breach of the contract of employment;
that breach was sufficiently serious to justify the employee resigning or else it must have been the last in a series of incidents that, taken together, justified the employee leaving;
the employee resigned in response to the breach and not for some other unconnected reason; and
the employee did not delay too long in terminating the contract in response, otherwise he or she may be deemed to have waived the breach and affirmed the contract.
Constructive dismissal (2): Main points to note
Unfair dismissal
For the purposes of an unfair dismissal claim, the same qualifying and procedural conditions apply whether an employee has been expressly or constructively dismissed.
If radically different terms and conditions of employment have been imposed on an employee, this may amount to an express dismissal, even where the employee remains in employment.
In cases where the employee resigns without notice in circumstances where he or she can prove constructive dismissal, the effective date of termination will be the date on which the termination takes effect. This is a question of fact, but will normally accord with the date on which the employee unambiguously indicates and communicates to the employer his or her acceptance of a repudiatory breach.
A constructive dismissal is not automatically unfair and employment tribunals must consider whether the employer had a potentially fair reason for the conduct that entitled the employee to terminate his or her employment without notice, and whether it acted reasonably.
When considering the fairness of a dismissal, the contractual position may be relevant but is not determinative.
Where terms and conditions of employment are varied in breach of contract as part of a reorganisation, an employer may be able to show that it had "some other substantial reason" for its conduct and that it acted reasonably, even if the unilateral variation of contract amounts to a repudiatory breach of contract.
An employee claiming constructive dismissal in the context of a transfer of undertaking need not prove that the employer was in breach of contract, as long as there has been a substantial change in his or her working conditions.
The right to claim constructive dismissal against the transferor is preserved even if the employee formally objects to the transfer of undertaking and does not transfer to the transferee.
Damages awarded to an employee who has been unfairly constructively dismissed may be reduced on the basis of contributory fault.
Redundancy payments
A constructive dismissal may give rise to a right to a redundancy payment under the ERA.
Discrimination claims
Constructively dismissing an employee is "dismissing" for the purposes of the SDA and the RRA but not for the purposes of the DDA. This is relevant when calculating the correct time period in which an employee may bring a claim.
To satisfy the qualifying conditions for bringing an unfair dismissal claim, an applicant must:
be an employee (or be a worker in a prescribed category under the ERA);
be below the age of 65 (unless there is a normal retirement age) - see s.109 of the ERA; and
have, in most cases, qualifying continuous service with the employer of one year, calculated to the effective date of termination ("the EDT") - see s.108 of the ERA.
Applicants must also ensure that they comply with the procedural rule under s.111(2)(a) of the ERA, which states that complaints of unfair dismissal must be brought before the end of the period of three months beginning with the EDT. The tribunal has a limited discretion to hear claims brought outside this period (s.111(2)(b)).
Once a claim has been brought, there are three substantive stages to be considered:
The employee must prove that he or she has been dismissed as set out in s.95 of the ERA (see part 1 of this Guidance Note, Constructive dismissal (1): general principles and specific terms).
If the employee has been dismissed, in order successfully to defend the claim the employer must prove that the reason for the dismissal was potentially fair (ie was on grounds of capability, conduct, redundancy, statutory restriction or some other substantial reason) - s.98(1), (2) and (3).
If the employer has shown it had a potentially fair reason to dismiss, the tribunal must consider the fairness of the dismissal in accordance with equity and the substantial merits of the case, deciding whether in the circumstances the employer acted reasonably or unreasonably in treating it as a sufficient reason to dismiss - s.98(4).
Automatically unfair dismissals
If, on the other hand, the employee is able to prove that the reason for dismissal was one of those designated under statute as automatically unfair, considerations of fairness do not apply.
These include dismissals (and selection for redundancy) related to: trade union membership and activities, statutory union recognition claims and certain dismissals connected with industrial action; specified health and safety matters and functions; working time; Sunday working amongst shopworkers and betting workers; the functions of occupational pension scheme trustees; the functions of employee representatives (on redundancies and business transfers); the operation of European Works Councils; protected disclosures of information; assertion of statutory rights; the national minimum wage; tax credits; part-time work; leave for family reasons (including maternity and parental leave); and transfers of undertakings.
Note: this summary does not purport to be a complete review of the law of unfair dismissal, for which readers should refer to the relevant provisions of the ERA.
Reorganisations and fairness - selected examples
Fair constructive dismissal
The employer constructively dismissed the employee by seeking to change his job duties and place of work. The reorganisation was necessary to prevent a serious adverse effect on the business, the employees were kept fully informed and were dealt with in a "kindly" way. The dismissal was fair (Genower v Ealing, Hammersmith & Hounslow Area Health Authority).
Unfair constructive dismissal
The employer reintroduced alternating shifts and had a good commercial reason so to do, but the new shifts would have placed intolerable strain on the family life of the employee. In failing to treat her in the same way as another employee who could not comply with the new system due to medical problems (by searching for alternative employment) and in taking a negative approach to the union representation to which she was entitled, the employer unfairly constructively dismissed the employee (Interconnection Systems Ltd v Gibson ).
The employer reorganised its business so that it no longer had a need for a central personnel department. The employee personnel officer was offered a new temporary position at a lower level and was given vague and unsatisfactory information about her future. The employee was unfairly constructively dismissed (Dickens Ltd v Broadbent).
CASE LIST
Alcan Extrusions v Yates and others [1996] IRLR 327
Avery Label Systems Ltd v Bannister 12.10.92 EAT 396/92
Bass Leisure Ltd v Thomas [1994] IRLR 104
Bass Taverns Ltd v Burgess [1995] IRLR 596
BMK Ltd and another v Logue [1993] IRLR 477
Bromley Hospitals NHS Trust v Mair 17.1.96 EAT 41/95
Catamaran Cruisers Ltd v Williams and others [1994] IRLR 386
Commissioner of Police of the Metropolis v Harley [2001] IRLR 263
Corby Borough Council v Barratt 11.7.94 EAT 306/94
Crank v Her Majesty's Stationery Office [1985] ICR 1
Crawford v Swinton Insurance Brokers Ltd [1990] IRLR 42
Delabole Slate Ltd v Berriman [1985] IRLR 305
Derby Specialist Fabrication Ltd v Burton [2001] IRLR 69
Dickens Ltd v Broadbent 23.9.94 EAT 845/92
Edwards v Surrey Police [1999] IRLR 456
Farrant v The Woodroffe School [1998] IRLR 176
Genower v Ealing, Hammersmith & Hounslow Area Health Authority [1980] IRLR 297
Goodwin v Cabletel UK Ltd [1997] IRLR 665
Harrold v Wiltshire Healthcare NHS Trust 16.3.99 EAT 850/98
Hogg v Dover College [1990] ICR 39
Hollister v The National Farmers' Union [1979] IRLR 238
Iceland Frozen Foods Ltd v Jones [1982] IRLR 439
Interconnection Systems Ltd v Gibson 19.5.94 EAT 575/93
Lambert v Croydon College [1999] IRLR 346
London Borough of Southwark v Mungol 3.11.00 EAT 1359/99
Merckx and another v Ford Motors Co Belgium SA [1996] IRLR 467
Morrison v Amalgamated Transport and General Workers' Union [1989] IRLR 361
Parkes v Banham Patent Locks Ltd 18.6.96 EAT 207/96
Polentarutti v Autokraft Ltd [1991] IRLR 457
Robert Cort & Son Ltd v Charman [1981] IRLR 437
Rossiter v Pendragon plc [2001] IRLR 256
Savoia v Chiltern Herb Farms Ltd [1982] IRLR 166
Shevlin v Coventry Free Church Homes for the Aged 24.5.93 EAT 403/90
St John of God (Care Services) Ltd v Brooks and others [1992] IRLR 546
Stephenson & Co (Oxford) Ltd v Austin [1990] ICR 609
Taylor v Connex South Eastern Ltd 5.7.00 EAT 1243/99
University of Oxford v Humphreys and another [2000] IRLR 183
Vose v South Sefton Health Authority 15.10.84 EAT 388/83
