A repudiatory breach of contract

Usually if the employee resigns, the contract terminates and the employee will have no claim against the employer for wrongful dismissal. However, employee's resignation may result in wrongful dismissal claim if the resignation is a result of the employer's repudiatory breach of the contract. Under section 95(1)(c) of the Employment Rights Act 1996 the employee is entitled to resign, without giving notice, and can make a claim of wrongful dismissal for the losses he suffered as a result of the early termination of the contract.

In order for a claim to succeed, the employee must show that the employer breached either an express or implied contractual term. Furthermore, the employee needs to show that his resignation is a response to the breach, and that such breach was adequately serious to justify the resignation. The employee will also need to show that he had not confirmed the contract following the breach by returning to work.

When determining the seriousness of the breach, the courts and tribunals will consider the express and implied contractual terms that were breached. The implied duty of trust and confidence is considered an important duty owed to employees by their employers. This duty states that the employer owes duty of support in the event that an employee is subjected by other employees to any form of abuse. It requires an employer to investigate the complaint and to take appropriate action. This was considered in Bracebridge Engineering Ltd v Darby [1990] IRLR 3 where it was held that by failing to provide adequate support and follow appropriate grievance procedure, the employer had breached the implied duty of trust and confidence.

In Western Excavating (ECC) Ltd v Sharp [1978] QB 761, the Court of Appeal attempted to define unreasonable conduct and found that the employer must act sensibly in the treatment of his employees. If the employer behaves or conducts his affairs so unreasonably that the employee cannot be expected to work in such environment any longer, the employee is justified in leaving. This definition of unreasonable conduct was criticised by Lord Denning, who stated that a certain degree of a particular behaviour may be considered to be in line with the employer’s business. The interpretation is nowadays very wide, however the principle set out in Western Excavating case remains a valid principle in establishing unreasonable conduct.

To breach the term of trust and confidence, employer must have been acting in a way that is likely to destroy or seriously damage trust and confidence which must exist between the employer and employee. In Morrow v Safeway Stores plc [2002] IRLR 9, the employee was publicly reprimanded and generally had a bad working relationship with the manager of the store. The Employment Tribunal held that although the public reprimand was a breach of the implied term of trust and confidence, it was not serious enough to entitle the employee to resign and claim unfair dismissal. The Employment Appeal Tribunal overturned this decision and emphasised that the breach of implied term of trust and confidence, if committed, is a fundamental breach stemming from the contract itself, and as such will entitle the employee to resign.

Therefore, in order for the repudiatory breach by an employer to be able to amount to a successful claim by the employee, the burden of proof will rest with the employee that such breach had entitled him to terminate the contract, and furthermore that he is entitled to recover damages caused by the breach.

Question 2

(a) In order to establish whether John has a successful claim against Walham Motor Repairs, it is necessary to consider the facts of his case. Firstly it is necessary to consider the nature of John’s employment. He has been employed for 10 months as a trainee car mechanic. The period of his employment is important when establishing what claim he might have. Employees may be entitled to bring a claim of wrongful dismissal and / or unfair dismissal. In order for the employee to be entitled to bring a claim of unfair dismissal, the employee needs to fulfil eligibility requirements. One of the requirements is that the employee must be in service for the period of at least 12 months. On the facts of this case, it is clear that since John has been in employment for 10 months, he would not be able to bring a claim of unfair dismissal. However, he might be able to bring a claim of wrongful dismissal. In order to establish whether the employee has been wrongfully dismissed it is necessary to consider whether the employee has been dismissed. In the present case it could be argued that John was dismissed. Although it may appear that John resigned of his own will, the circumstances surrounding his decision to resign imply that he was put into a situation where he could no longer tolerate the working environment he was in. The second point to consider is whether the employer was in breach of the contract. John could argue that the employer had breached the implied term of trust and confidence. In Courtaulds Northern Textiles v Andrew [1979] IRLR 84 it was held that employers must not without reasonable grounds conduct themselves in a way that is likely to destroy or seriously damage the relationship of trust and confidence between the employer and employee. Furthermore any unreasonable conduct designed to damage such relationship will be considered a fundamental breach of the implied term. In the present case, Steve’s ongoing treatment of John, as well as publicly reprimanding him has seriously undermined John and if shown as sufficiently serious, this behaviour is likely to amount to repudiatory breach of contract. The final point to consider is whether the employer was entitled to summarily dismiss the employee. The employer will only be entitled to summarily dismiss the employee where the employee has committed gross misconduct. In the present case there is no evidence of John committing gross misconduct, and therefore it could be argued that the employer was not entitled to summarily dismiss him. After consideration of these three points, it is evident that John may be entitled to bring a claim of wrongful dismissal.

(b) In order to succeed in his claim, John would need to demonstrate that the employer breached an implied term of trust and confidence. He would need to show that by constantly criticising and humiliating him in front of his colleagues and by publicly reprimanding him in front of the customers, Steve had seriously damaged their working relationship. Secondly, John would need to show that he resigned in response to the breach. Since Steve’s treatment of John was such that John felt he could no longer work with Steve, this could be sufficient evidence of John’s resignation being a direct result of the breach.

Thirdly, John would need to demonstrate that the breach committed by the employer was sufficiently serious to justify his resignation. Breach of the implied term of trust and confidence is generally considered to be a fundamental breach. It could be argued that Steve destroyed their working relationship and therefore breached the implied term of trust and confidence.

Finally, John would need to show that he had not confirmed the contract by returning to work. Since John had not returned and does not intend to return to work, he has not confirmed the contract. By not returning to work, the employee demonstrates constructive dismissal.

(c) In order to ensure that his claim can go ahead, John will need to demonstrate that he suffered loss due to the breach caused by his employer. Remedies for the breach of contract in cases of wrongful dismissal are awarded in terms of pecuniary losses. Pecuniary or financial losses will include net salary for the notice period, any benefits under the contract of employment as well as any potential commission if applicable.

In general employee cannot claim for damages for injured feelings for the way in which he was dismissed. This was considered in Addis v Gramophone Co Ltd [1909] AC 488 where it was held that the employee would not be awarded damages for injured feelings where the manner in which he was dismissed was such to destroy the confidence of the employee.

John may, however, be able to recover damages for psychiatric harm and hurt feelings caused by employee’s treatment of employee during the course of employment. In Johnson v Unisys Ltd [2001] IRLR 279 it was held that compensation could be awarded if the employee can show that he suffered psychiatric harm or even hurt feelings, but only where the harm had occurred during the employment relationship and was not caused by the dismissal alone. Therefore, if John can show that he was consistently mistreated and singled out by his employer, he might be able to claim damages for psychiatric injury as well as for all pecuniary losses.

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