Constructive Unfair Dismissal and Breach of Contract

Structure: Issues, Legal rules and application

General Analysis

Flighty worked for Bossman and Co (“The Company”) as a Sales Assistant. It is not clear how long he has been working for the company. The company seems to be happy with the quality of his work however he is rather quick temper and is given to disagreeable behaviour. The request from his store Manager to help one of his colleagues to stock the drinks shelf was turned down by him by using abusive language. Although the question does not give full details of what exactly took place. Flighty then stormed off pushing past a customer. This could create a bad impression of a company and have adverse effect of the company in customers mind. Temperance, the General Manager of the company heard about this incident and Flighty’s general attitude and made a decision that Flighty has to go. Accordingly she calls him into her office and dismisses him on the spot.

Legal issues:

The legal issues arising from the above situation are:

i) Dismissal of Flighty, was it unfair?

ii) Any possible disciplinary action; any grievance procedure in place?

iii) Any statutory or contractual notice given?

iv) The enforceability of contract of employment;

v) Can this be construed as a constructive unfair dismissal?

Legal Rules and application

When an employee commits a breach of contract by acting in a way which could be construed as serious misconduct then generally the employer has number of options such as ignoring it, disciplining the employee, dismiss the employee with or without notice or sue the employee for damages. Dismissal without notice, as in this case, is a Summary dismissal. This is only justifiable if the employee’s behaviour is so apparent that the employee and employer relationship cannot possibly be continued. As can be seen in Sinclair v Neighbour ^[1], an employee who took £15 from the till leaving an IOU was considered to be dishonest and hence was liable for summary dismissal although he intended to give back the money few days later. Similarly, in Ross v Aquascutum Ltd^[2] , an employee who was a night watchman, was found to be away from the building he was suppose to be guarding every night for 2 hours and therefore his summary dismissal was held to be justified as the breach of contract was considered to be serious.

On the other hand, in Pepper v Webb^[3] , the employer ordered Mr Pepper, an employee, to do a particular job but the employee refused, swore and walked off. He was dismissed. It was held that the employer was justified and not liable for wrongful dismissal. The employee had repudiated his contract by his actions. He refused to obey the employer’s reasonable instructions and had been acting in an unsatisfactory way for a long time. The employer did carry out an interview before actually dismissing him. On the other hand, in Wilson v Racher^[4] , there was an argument between an employer and employee over some gardening duties and the employer dismissed the employee in question. It was held that the dismissal was unlawful as there was no history of unreasonable or uncooperative behaviour by that employee. It was just a one-off incident of using abusive language and therefore could not be taken as a fundamental breach of contract.

Unfair and Constructive Dismissal

As an Employer you have a duty not to dismiss any employee unfairly or force them to resign which could then become a constructive dismissal. If such a situation does arise, for example, employer’s unreasonable behaviour or constant criticism of an employee’s work etc then the employee does not have any choice other than to resign. This is a situation where that employee may be able to complain to the employment tribunal successfully and make a claim for constructive dismissal. Of course, if the situation becomes intolerable then the employee can only see his way out of it by resigning as there is no other alternative to sort out the problems. There are incidences where an employee has been asked to either resign or face a dismissal and as a direct result of which that employee does resign then that is construed as constructive dismissal. In order for a claim for constructive dismissal to be successful that employee must actually resign, the mere threat of resigning is not enough.

Employees have statutory protection against being unfairly or constructively dismissed. If an employer acts unreasonably so as to force an employee to resign, that employee may well have a case of constructive dismissal, however, the act of resignation must be the only possible action left having exhausted all others. Ultimatums such as ‘resign or be dismissed’ which result in resignation are an example of constructive dismissal. An actual dismissal or act to cause resignation must have taken place for a claim to be made.

With the exception of cases of automatic unfair dismissal, an employee must have a minimum of one years continuous service and be under either the contractual retirement age or under 65 years old to make a claim. There may be a claim for breach of contract in these circumstances. An actual dismissal or act to cause resignation must have taken place for a claim to be made. A proper procedure must be in place to deal with dismissals to ensure that, before the dismissal takes place, the matter is correctly investigated, the employee is given a chance to state their version, the disciplinary procedure is followed etc.

There are five potentially fair reasons that an employee can be dismissed for. To just allocate a ‘fair’ reason to a dismissal is not enough to make it fair. All dismissals have to be able to stand up to the scrutiny of an employment tribunal hearing. A proper procedure must be in place to deal with dismissals to ensure that, before the dismissal takes place, the matter is correctly investigated, the employee is given a chance to state their version, the disciplinary procedure is followed etc.

An employee must have the skill, aptitude and physical and mental ability to perform their job correctly. Once identified that this is not the case the employee must be made aware of their shortcomings and that they are fully discussed with them, they must also be given time and any appropriate training to improve with full monitoring of the ongoing situation. Finally, if all else fails, the implementation of the warnings procedure should be considered. By following this route a potentially fair dismissal can take place. Dismissal may also take place as a result of ill health.

Under ERA 1996 section 98, the burden of proof lies with the employer to show a defence under certain headings as the reason or principal reason for dismissal^[5]. Under (s.98 (2) (b)), which outlines conduct, covers a wide range of activities and one such activity is theft. There are no requirements that state that the misdemeanor must have been great. The question is though, whether the employer acted in a reasonable manner. In the case of Flighty, it does seem as though the employer has not acted reasonably because proper procedures have not been followed. A full investigation should have been carried out and then he should have been suspended on full pay pending a proper hearing to be held at a later date. In addition to this he should have been given a right to appeal against the decision at the hearing.

An employee does not have to be suspended prior to investigations and has no bearing on the allgation of gross misconduct. The Code of Practice states that “precautionary suspension pending investigation should be with full pay and if there is going to be an internal investigation.” In McClory v Post Office^[6], 3 postmen were suspended on full pay but were taken back after being cleared of criminal charges. It was held that suspension was not in breach of their employment contracts. There was an implied term that an employer would only suspend employee on reasonable grounds.

There are two type of conduct each of which are dealt with in a different way. Gross misconduct is a situation that is so serious that it warrants summary dismissal, however, before the decision to dismiss is taken the employee must be given an opportunity to defend their position against the allegation, then, taking this information into account, the decision is taken to dismiss or not. Normal misconduct can include things like persistent poor timekeeping and absenteeism, bad attitude and carelessness. Misconduct must be dealt with via the disciplinary procedure and a decision to dismiss is the final stage of that procedure.

In this case, Bossman and co has terminated Flighty’s employment without notice. The Company has terminated his employment without even giving him an opportunity to take part in any disciplinary procedure it may have in place. It is not clear whether any such grievance procedure has been incorporated in Flighty’s employment contract.

The mere words like “you are no longer welcome in the company” at that moment may not have been construed as dismissal in the circumstances. However, the fact that the General Manager called him in her office and then told him that he no longer welcome in the company has a different perspective to it. This clearly shows that the employer clearly intended to dismiss him.

Advice: Flighty

Summary dismissal is only used in certain circumstances such as gross misconduct. Your employer should have carried out an investigation into the alleged incident in which you got angry and refused to carry out the orders given to you. Also no other disciplinary or grievance procedure seems to have been followed. No written warning has been given or disciplinary action taken. Warnings following consultation may have been more appropriate here because of both the disruptive effect of short-term and possible loss of moral.

There has to be a sound contractual reason, like serious breach of contract, for dismissing an employee without notice if not, an employee can recover damages for wrongful dismissal.^[7] If the notice is not given then the employer has to justify this as to why a statutory requirement was not complied with. In the case of Laws, she was dismissed for disobedience and the employer considered her conduct to be a breach of employment contract, although it was a one off incident, her dismissal was held to be a wrongful dismissal. An employer would be justified on the basis of seriousness of the breach. In Jupiter General Insurance Co v Shroff^[8] it was stated that “summary dismissal was a strong measure which was justified only in exceptional circumstances” by the Privy Council.

As you have been dismissed summarily which means he has not received any pay in lieu of notice, expenses etc and has an immediate effect his only remedy is to bring an action for damages for breach of contract. You may bring the action either in a local County Court or in an Employment Tribunal.

In order to claim unfair dismissal, an employee must have a one year continuous service. If you have been working for the company for 1 year and then you would satisfy that requirement but if you have worked for the company for 6 months then you would not qualify to make a claim for unfair dismissal.

Advice for Employer

Whether the dismissal is fair or unfair will depend on what reasons you as his employer have put forward and the circumstances surrounding your decision. It would also depend on the size and resources available to you as his employer. This will decide whether you as an employer have acted reasonably or unreasonably in treating Flighty’s outburst. You as his employer could justify your decision to dismiss him if you can show that the reason behind your decision for dismissing him was his continuous bad behaviour. It will also depend on substantial merits of the case.

Obviously, this leads to questions such as, have you followed fair procedure while dismissing him and was your response a reasonable response expected from a reasonable employer? It should be noted at this stage that the burden of proof with regard to fairness is neutral which really means that you do not have to prove it if the facts are doubtful or in dispute. Generally, though, if Flighty does complain to the tribunal then the tribunal will expect you to show why you made that decision and how that decision to dismiss him was reasonable. The reason being you as an employer have made that decision and of course have greater access to information and therefore have greater responsibility to prove that your decision was correct.

In practice tribunals take into account the Advisory, Conciliation and Arbitration Service Code of Practice on Disciplinary Practice and Procedures in Employment. Although if you fail to follow this, the code does not automatically mean that the dismissal was unfair but it becomes much more difficult to prove your case.

As you know if an employee behaves in a manner which could be classed as a Gross Misconduct, for example drunkenness at work, abusive language towards fellow employees, stealing etc, then that itself warrants for summary dismissal. Even so, in such situations an employee must be given an opportunity to defend the arrant allegations against them before making a decision whether or not to dismiss that employee to make the dismissal fair. In addition to this if an employee has really bad attitude toward their work or absenteeism is quite frequent or is very careless in performing their duty or may be that employee is really bad tempered, then such a misconduct must be dealt with through disciplinary procedures followed by a warning and as a final stage if things do not improve, a dismissal should take place. This will be then treated as a fair dismissal.

If an employer failed to follow correct dismissal procedure and dismissed an employee without consultation, then it had been thought that the case could be looked upon in a hypothetical manner, where if a fair procedure had been followed would the employee have been dismissed. If he would have been dismissed anyway, then it was a fair dismissal. However, recently the House of Lords have decided that this is incorrect and that in a case such as this, the employer’s actions should be considered, not his predicted actions.

In Polkey v A E Dayton Services Ltd^[9], the appellant was one van driver out of the four.

A E Dayton made the decision to rearrange the work, thus replacing the 4 van drivers with one representative and two van sales people. Three of the four van drivers were made redundant as a result and only one of them was considered suitable. The manager called the appellant into his office and dismissed him on the spot.

A tribunal decided that there had been a disregard for the terms of the Code of Practice as the manager failed to consult or warn the appellant. However it was also held that even if there had been any consultation, the outcome would have been the same and the appellant dismissed. Therefore the dismissal was fair. This ruling was upheld by the Court of Appeal however the House of Lords reversed the decision. For the reason that the employment tribunal should have focused on what the employer did do and not what might he have done. Therefore if an employee is not consulted before dismissal then this will be seen as not following the correct procedure and thus unfair dismissal.

Conclusion

With regards to Flighty, proper procedure do not seem to have been followed for the summary dismissal i.e. verbal warning, written warning followed by disciplinary action and then dismissal.

Flighty may be able to claim unfair dismissal if he wasn’t given an opportunity to explain his actions. It is possible that he was provoked by other member of staff and was in a bad mood at that particular moment. It is imperative in these circumstances that a proper grievance or disciplinary procedure has been followed by the employer. On the other hand it may not be necessary if the misconduct is serious and there is a history.

Flighty was dismissed because of his bad and uncooperative attitude towards work. In Post office v Foley and HSBC Bank v Madden^[10] Mr. Foley was a postal worker and Mr. Madden worked for HSBC bank and both were dismissed for the reason of their behaviour. Mr. Foley who left the shift early for domestic reason was spotted in a pub although he claimed that he went in to call for a taxi. This explanation was rejected by the employer and he was dismissed. EAT upheld that decision.

If Flighty decides to complain to the Employment Tribunal, the maximum amount of compensation available for unfair dismissal is limited by statute. In the recent changes of the Employment Relations Act 1999 the law governing awards for unfair dismissal was amended. One of the changes was index linking the minimum and maximum limit on compensatory awards to £50,000 (now £53,500). The defence of justification will be available to the employers and could be narrowly interpreted.

As I said in my analysis an employee does not need to have one years service to be able to make a successful claim if the tribunal finds that the reason for dismissal was automatically unfair. Also in such cases there is no age limit either. In nutshell, if an employer gives a lawful and reasonable order and employee refuses it as a result of which that employee is dismissed then that dismissal may not be unlawful as each case must be considered on its own merits.

Bibliography

1. Cases & Material, Sweet & Maxwell, on Employment Law by Richard W Painter, Ann Holmes and Stephen Migdal.

2. Selwyn’s Law of Employment by NM Selwyn published by Butterworths 10^th Edition

3. Employment Law by James Holland & S Burnett by Blackstone

4. Statutes on Employment Law 200-2001 10^th Edition by Richard Kinder published by Blackstone’s

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Footnotes

^[1] 1967 2 QB 279 , Employment Law by James Holland & S Burnett by Blackstone page 188-189

^[2] page 306, Selwyn’s Law of Employment by NM Selwyn published by Butterworths 10^th Edition

^[3] 1969 1WLR 514 Cases & Material on Employment law by Richard Painter and Anne Holmes published by Oxford University Press 5^th Edition 2004 page 359

^[4] 1974 ICR 428

^[5] Employment Rights Act 1996, Section. 98

^[6] page

^[7] Law v London Chronicle (Indicator Newspapers) Ltd 1959 1 WLR 698.

^[8] 1937 3 ALL ER 67 PC page 305 Selwyn’s Law of Employment by NM Selwyn published by Butterworths 10^th Edition

^[9] Selwyn’s Law of Employment, NM Selwyn, 10^th Edition. Published by Butterworths, P. 255

^[10] 2000, IRLR 827 Court of Appeal, page 445 Employment law Cases & Material by Painter and Holmes