Constructive dismissal and unfair dismissal issues

This question involves the issue of whether Maggie’s employers are vicariously liable for the wrongdoings of Deidre and whether it can justify Maggie’s resignation. Constructive dismissal and unfair dismissal issues are discussed. Lastly, the ACAS Disciplinary and Grievance Code and the remedies available to Maggie for unfair dismissal were looked into.

Vicarious liability involves the imposition of liability on the employers for the tortious

acts of the employees. The imposition of this does not depend on the employer being at fault,

the employer can be completely blameless. To establish that the employer is vicariously

liable for a tort committed by an employee, the claimant must show that the employee is

indeed an employee of the employer, that the employee committed a tort, and that he did so

in the course of his employment.

In recent years, the courts have broadened the scope of vicarious liability. The modern test

for the “course of employment" is whether or not the employee’s acts were so closely

connected to his employment as to make it fair and just to hold the employer vicariously

liable. This essential principle was derived from the leading House of Lords cases

of Lister v Hesley Hall Ltd [1] and Dubai Aluminium Ltd Co v Salaam & Ors. [2] 

Ultimately, Tony and Kate can be held vicariously liable for the acts Deidre and because of that they should ensure that they have acted reasonably in all circumstances and take appropriate action.

The issue is where Maggie was verbally abused by Deidre in front of members of staff and parents. Further she told Maggie that she was always ‘skiving’ and the nursery had a better atmosphere when she was absent. The employers would be responsible for the appropriate public reprimand of hostile comments by their business manager. Although it is not clear how serious the extent of the verbal abuse was nevertheless it has happened in the course of employment. Further, the incident took place at the nursery and there were other witnesses to this, the rest of the staffs and parents. Maggie was humiliated and it can be said it’s a public humiliation just for coming late as her car had broken down. This is an unavoidable situation for Maggie. Verbal abuse is considered harassment but it would be difficult to hold the employers liable unless there was a discrimination based on age, race, ethnicity, gender, sexual orientation or religious beliefs. On the facts, Maggie was not verbally abused to any of this so it cannot be harassment. Nevertheless, the employment tribunal would likely find that the employers should have taken appropriate disciplinary action on Deidre and possibly could have resolved the situation by meeting Maggie and attempt to find a solution before she resigns and claims constructive dismissal. No action has been taken, till she raised a grievance. It could be that the employers didn’t know but it is unlikely as the humiliation was witnessed by so many.

Since Maggie had resigned later on she can also bring a claim under unfair constructive dismissal as a result of a breach of an implied term by the employers. In order to claim for unfair dismissal, Maggie would need to establish that she is an employee [3] . Maggie bears the burden of showing that she is qualified to bring a claim under unfair dismissal. There is little reason to doubt that Maggie is an employee. The question states that she has been employed for more than a year and is working full time as an employee for the Little Stars nursery. She meets the one year’s continuous employment qualifying period for unfair dismissal. [4] It is also stated that she is a qualified nurse. Therefore she is not a member of the excluded category [5] . Now it is established that she is qualified to bring a claim for unfair dismissal. Section 111(1) of Employment Rights Act 1996 provides that unfair dismissal claims are to be enforced in employment tribunals. Maggie has to present her complaint within 3 months of her effective date of termination of her contract of employment or within a period tribunal considers reasonable [6] .

The next step is to establish whether there was a dismissal. Maggie needs to show that she has been dismissed and it was unfair. There are three types of dismissal as laid out in the Section 95(1) of ERA 1996.If Maggie cannot prove that she was dismissed the employment tribunal will rule out her claim for unfair dismissal. On the facts, Maggie’s employment contract was not terminated by her employers and we are told that she resigned by letter. However, Maggie could argue that it was the unreasonable actions of her employer which forced her to resign. In this way Maggie would still be entitled to make a claim under unfair dismissal, no matter the fact she resigned. In a situation ‘where the employee terminates the contract with, or without, notice in circumstances which are such that he or she is entitled to terminate it without notice by reason of the employer’s conduct’ [7] .

This provision is known as constructive dismissal. The few incidents that took place in Maggie’s workplace would give a rise to an obvious constructive dismissal. For example: the stressful environment at work, she was verbally abused and humiliated in front of other staffs and parents for being late, had her work hours increased with no increase in pay and where she was told that she was to be demoted for being irresponsible for leaving the heaters on and had too many days off sick. Constructive dismissal is a type of unfair dismissal claim which can be brought up by an employee if they claim that the employer has committed a serious breach of their contract of employment also known as repudiatory breach.

According to Selwyn, ‘the doctrine of constructive dismissal has had a somewhat chequered history’ [8] . The real problem was to determine the nature of the conduct of the employer which entitles the employee to resign [9] . “Did such conduct have to amount to an actual breach of contract by the employer or could any unreasonable conduct by the employer be sufficient to entitle the employee to resign?" For a long time the latter theory held sway, leading to some of the most bizarre and eccentric decisions in the law [10] .

However in Western Excavating (ECC) v Sharp [11] it was held that whether the employer’s conduct was reasonable or unreasonable was not the appropriate test. Instead the question was whether the employer’s conduct amounted to significant or repudiatory breach of contract going to the root of the contract of employment or the conduct demonstrated that the employer no longer intended to be bound by one or more essential terms of the contract.

A very controversial area is the terms which may be implied automatically as a matter of law, whether or not the individuals have agreed to them in the first place. These terms are ‘implied terms’ and come to existence because the courts consider them to be appropriate in the employment relationship. Maggie could say that the employers had breached the duty of mutual trust and confidence in relation to her verbal abuse and humiliation. There might be a possible breach in duty to provide a safe working environment, as we are told that the Maggie had to take a number of off days sick due to the conflict between Marla and Deidre which caused a stressful time at the nursery. It impacted on Maggie’s health. In the case of Thanet District Council v Websper [12] , the EAT found that the employee was unfairly constructively dismissed after he was sick for work related stress and only allowed to return to his previous job. The Council was in breach of its implied contractual duty to provide him with a safe place of work therefore Mr.Websper is justified in resigning. The EAT further stated that it is the duty

of the Council to make arrangements to the working arrangements because the stress was due to work. Similarly, Maggie was suffering due to stress from work and it might justify her resignation. The employers should have consider changes in her working environment when there is evidence suggesting that her absence is caused by factors relating to work. They

may also be in breach of implied term requiring employers to safeguard the health and safety of the employees [13] which would justify constructive dismissal.

In the duty of mutual trust and confidence it is said that the “employer must not, without a reasonable and proper cause conduct themselves in a way that is likely to destroy or damage the relationship of mutual trust and confidence that exist between employers and employees". This term is mutual; it imposes a binding duty on both the employer and employee.

Abusive language in the workplace can give rise to a breach of implied trust and confidence if it is sufficiently serious to justify the employee resigning and claiming constructive dismissal. For example, in the recent case of Horkulak v Cantor Fitzgerald International [14] , Horkulak was subjected to verbal abuses over a period of time by his chief executive. The Court of Appeal found that the relationship of trust and confidence of Horkulak and his employer have broken down because of the employer’s behaviour. Similarly, the courts have held that public lashing at an employee in a way the courts have accepted it as humiliating would be a breach of this duty. Another previous case [15] of verbal abuse precisely; swearing at the employee amounted to a fundamental breach of the contract.

Following these decided cases, Maggie can claim she was verbally abused therefore she is entitled to resign and claim constructive dismissal. Adding to that, she was also humiliated in front of others. Although she was not verbally abused over a period of time as in Horkulak, Maggie might have a good chance considering now the courts are not tolerating verbal abuses made by the employer as a common thing to happen in workplaces. The test to determine whether the implied term of mutual trust and confidence has broken down is an objective one. This means that the court or tribunal will assess how a third party would view the situation.

If the tribunal finds Maggie constructively dismissed, she has to establish that the breach was fundamental, she has resigned in response to that breach and that there has been no delay in resigning in where the employee can be said to have affirmed the breach. On the facts it can be said that the employers breach was fundamental as it was verbal abuse and public humiliation and there was no appropriate action taken by her employers on the business manager. Her resignation took place at a later date and not immediately. Whether her decision to still continue employment and not leave can be said to have affirmed the breach will be the same as below [16] .Ultimately, the tribunal will decide whether the breach of implied duty was so serious based on individual facts as to amount to a successful unfair dismissal claim.

The basic principle of this is that an employment contract can only operate effectively if both parties have worked in the maintenance of the relationship. This means that both parties must honestly act in way aimed to maintain the relationship and not destroy it. Also in the case of Malik v BCCI [17] the court held that the employers had breached the duty when as a result of the employer’s poor reputation, the employees was unable to obtain alternative employment after redundancy. In Morrow v Safeway Stores [18] it was held that where the implied term of mutual trust and confidence is breached it would automatically amount to a repudiatory breach.

The next issue where Maggie could bring a claim under unfair constructive dismissal is where her work hours were extended. This would be a breach of express term in her contract.

In Simmonds v Dowty Seals Ltd [19] , Simmonds was contracted to work on night shift. When his employer attempted to force him to work on the day shift, he resigned. It was held that he could treat himself as being constructively dismissed because the employer’s conduct had amounted to an attempt to unilaterally change an express term of his contract. Similarly, Maggie could treat herself as being constructively dismissed.

Also the recent case, of Land Securities Ltd v Thornley [20] where the employer was in a

fundamental breach of her contract of employment in imposing a new job description. The job

changed her duties from a hands-on one to a managerial one. Accordingly, she had been

constructively dismissed. Other cases where the employer’s had been repudiatory by

reducing the employee’s salary and status. [21] 

To establish constructive dismissal, Maggie must show there has been a conduct of an employer to employee. The conduct was that her working hours was increased and no increase in pay. Presuming Maggie’s contract of employment did not allow the changes of working hours then her employer’s conduct would amount to unilaterally change an express term of her contract. Even if her contract allowed the changes in working hours she should have been given a letter stating the new terms and a notice. A change of the express term is a repudiatory breach of the contract.

Next, she has to accept the employer’s repudiatory breach of contract. On the facts, she has protested about the hours but her employer refused to listen about it therefore its likely there was an acceptance of that breach. If Maggie has resigned in response to the repudiatory conduct within a reasonable time without affirming the breach then she is likely to be found constructively dismissed. Whether she has affirmed or consented to the employer’s repudiatory breach is a matter of fact and degree. On the facts her alleged breach took place 2 months before her resignation, which was on 15th October 2010.

In Simms v Sainsburys Supermarkets [22] , the Employment Appeal Tribunal held that a delay of ten weeks between the date the employer’s breach and the date the employee left was too long. Hence there has been affirmation by the employee and there was no constructive dismissal. If she is constructively dismissed, it still has to be determined that whether her dismissal was fair or unfair by the facts of the case and whether or not the employer has acted reasonably.

In contrast to Simms, there are some earlier cases which allowed the employee to claim unfair dismissal while remaining in employment. In Hogg v Dover College [23] it was held that the letter from the employer had terminated his contract and Mr.Hogg was dismissed. It was further held that since the employer’s letter had substantially changed the terms of his contract, he was entitled to resign and claim constructive dismissal. The fact that he remained working does not mean that he has accepted the changes and affirmation can be assumed, since his continued contract was a totally different contract.

Further in Alcan Extrusions v Yates [24] this principle was dealt with more. It was said that where the employer unilaterally imposes a radically different terms in the contract of employee, there will be a dismissal and it is not affected by the employee choosing to remain at work, under protest of the new terms. The tribunal held that the employees had been dismissed and this decision was upheld by Employment Appeal Tribunal (EAT).Further it was said that it is not right to argue that the contractual changes imposed can only be potential repudiatory breach which allows the employee to resign and claim constructive dismissal. Similarly, in our case Maggie protested about her working hours but remained working. She only resigned later.

Hence, she would likely succeed in her claim regarding her working hours extended and no increase in pay because it is clear that her employer had changed her contract to a totally different one which is an obvious repudiatory breach. It is unfair to force her to work for extra 5 hours a week knowing she has a child at home to take care of and adding to that burden no extra pay is given. Her employers might argue that there is a flexibility clause allowing them to increase her hours. Ultimately, it is for the employment tribunal to decide based on the facts whether Maggie can succeed in her claim for unfair constructive dismissal.

The next issue is in relation to the disciplinary meeting. The phrase was to be demoted is suggestive that a demotion has not taken place. Nevertheless, a disciplinary meeting was held and the reason Maggie was told she was being demoted is for having had too many days off sick and being irresponsible in leaving the heaters off. In the case of Stanley Cole (Wainfleet) Ltd v Sheridan [2003] IRLR 52, the EAT held that the employer had committed a repudiatory breach of contract in giving the employee an unjust warning and disciplinary sanction which was disproportionate to the misconduct of the employee. A final written warning was too severe for the employee’s conduct which was minor, thereby the warning was disproportionate.

Similarly, in our case, Maggie was given a disciplinary sanction which is disproportionate to her conduct. The employers have committed a repudiatory breach of contract. Maggie was not told of the disciplinary action in notice in writing for her to prepare herself and her right to be accompanied; this is a failure to follow the ACAS Disciplinary Code. It is not a gross misconduct [25] on her part to have such severe penalty. Her employers would probably argue that the dismissal was fair [26] in grounds that it fits the category of “capability or qualifications". Then they have to show the tribunal that their decision to dismiss fell within the bands of reasonable responses. In deciding whether the dismissal is fair or not the tribunal will apply the range of reasonable responses test as adopted in British Home Stores v Burchell.

“A relevant factor might be whether or not the employee was warned that her performance was not satisfactory. In the case of incapacity, the employer will normally not act reasonably unless he gives the employee fair warning and an opportunity to mend his ways and show that he can do that job." [27] 

A more reasonable approach the employers should have taken is to use the three stage warning test for Maggie’s minor incompetence. She has not been given a warning at all before the disciplinary action. There was no investigation carried out on her reason of absence. Under Regulation 3 of the 1992 Management of Health and Safety at Work Regulations, employers are required to carry out stress risk assessments and consult with safety representatives on all aspects of health and safety.

In April 2009, the Employment Act 2008 changed the way grievances and disciplinary matters were handled by replacing the statutory provision with the new ACAS code of practice. Having raised grievance to her employers, Maggie was told to attend the grievance meeting but she did not. It could be that she was unable to attend the meeting as she was sick due to stress related illness. Maggie could appeal for a reasonable date and venue for the grievance meeting. Further, the grievance meeting was chaired by the person she is complaining about. In the code of practice, it’s stated that the grievance should be chaired by other managers whom the complaint is not about. Thus, the employer has failed to follow the procedure. Tony and Kate should have chaired the grievance meeting and not Deidre as there should be a fair hearing. The procedures employers should follow are set out notice in writing, should hold a meeting with the employee, allow the employee to be accompanied and then take appropriate action and allow the employee to take the grievance further if it’s not resolved. The tribunals have a discretionary power to award up to 25% [28] where they consider the employer failed to comply with the code and was unreasonable.

In conclusion, if the tribunal decides she is successful, there are 3 remedies available for UD.

They are reinstatement, re-engagement [29] or compensation. Reinstatement is where the employee gets his or her job back in result of reversal of the dismissal. Re-engagement is where the employee gets a different job with the same employer. However, the most common remedy is compensation; where 95% of cases successful for UD will be awarded this. Compensation consists of basic award [30] and compensatory award. [31] 

BIBLIOGRAPHY

Books

Norman Selwyn, Selwyn’s Law of Employment, Oxford University Press, 16th edition (2011)

Gwyneth Pitt, Employment Law, Sweet & Maxwell, 7th edition (2009)

Bowers J, A Practical Approach to Employment Law, 7th edition (2005)

Deborah Lockton, Employment Law, Palgrave Macmillan Law Masters, (2010)

Simon Honeyball, Honeyball & Bowers, Textbook on Employment Law, 11th edition (2010)

Articles

Hugh Collins (2000) ‘Finding the Right Direction for the Industrial Jury’, 29 Industrial Law Journal 288.

Hugh Collins (2004) ‘Nine Proposals for the Reform of the Law of Unfair Dismissal’ London: Institute of Employment Rights.