The 2 Tests for Constructive Dismissal

Constructive-Dismissal-Solicitors

The Employment Appeals Tribunal applied 2 common tests to all claims of constructive dismissal.

We now have the WRC adjudicating on these claims, but the same principles apply, and they emanate from a seminal decision from the Supreme Court in 2009, Berber (respondent) v Dunnes Stores Limited (appellant), [2009] 20 E.L.R. 61.

Constructive dismissal is where the employee quits and leaves the employment.

Constructive dismissal, as defined by the Unfair Dismissals Act 1977 is

“dismissal in relation to an employee means the termination by the employee of his contract of employment with his employer whether prior notice of the termination was or was not given to the employer, in circumstances in which, because of the conduct of the employer the employee was or would have been entitled or it was or would have been reasonable for the employee, to terminate the contract of employment without giving prior notice of the termination to the employee”.

The Employment Appeals Tribunal has held that an employee is only entitled to succeed in a constructive dismissal claim where

“An employee is entitled to terminate the contract only when the employer is guilty of conduct which amounts to a significant breach going to the root of the contract or shows that the employer no longer intends to be bound by one or more of the essential terms of the contract.”

The relationship of trust and confidence between employer and employee is a 2 way one.  The Tribunal has held that

“….. an employer is entitled to expect his employee to behave in a manner which will preserve his employer’s reasonable trust and confidence in him so also must the employer behave”.

So the Tribunal has to decide in any constructive dismissal case whether

“the employer’s conduct amounted to undermining the relation of trust and confidence between the parties in such a way as to go to the root of the contract. “

The Contract Test

This “contract test” was summarised in the English case “Western Excavating Ltd. V Sharpe (1978)”:

” If the employer is guilty of conduct which is a significant breach going to the root of the contract of employment, or which shows that the employer no longer intends to be bound by one or more of the essential terms of the contract then the employee is entitled to treat himself as discharged from any further performance”.

The Reasonableness Test

The reasonableness test asks whether an employer conducts himself or his affairs so unreasonably that the employee cannot fairly be expected to tolerate it any longer and justifies the employee leaving.

In Berber v Dunnes Stores  the Supreme Court held, in allowing the Dunnes Stores’ appeal and setting aside the judgment of the High Court:

In determining whether there has been a breach of the implied term of mutual trust and confidence in employment contracts:

  1. The test is objective.

  2. The test requires that the conduct of both the employer and the employee be considered

  3. The conduct of the parties as a whole and the cumulative effect must be looked at.

  4. The conduct of the employer complained of must be unreasonable and without proper cause and its effect on the employee must be judged objectively, reasonably and sensibly in order to determine if it is such that the employee cannot be expected to put up with it.

Breach of Contract-Implied Term of Trust and Confidence

The Supreme Court, in Berber v Dunnes Stores, held:

There is implied in a contract of employment a mutual obligation that the employer and the employee will not without reasonable and proper cause conduct themselves in a manner likely to destroy or seriously damage the relationship of confidence and trust between them. The term is implied by law and is incident to all contracts of employment unless expressly excluded.

The term imposes reciprocal duties on the employer and the employee. In assessing whether there has been a breach by the employer what is significant is the impact of the employer’s behaviour on the employee rather than what the employer intended. Having regard to the mutuality of the obligation the impact of an employee’s behaviour is also relevant.

The test is an objective one: if conduct objectively considered is likely to cause serious damage to the relationship between employer and employee a breach of the implied obligation may arise (Malik v Bank of Credit and Commerce International S.A. [1997] I.C.R.606).

In Lewis v Motorworld Garages Limited [1986] I.C.R. 157 Glidewell J. summarised the law as follows:

  1. In order to prove that he has suffered constructive dismissal an employee who leaves his employment must prove that he did so as a result of a breach of contract by his employer, which shows that the employer no longer intends to be bound by an essential term of the contract: see Western Excavating (E.C.C.) Limited v Sharp [1978] I.C.R. 221.
  1. However, there are normally implied in a contract of employment mutual rights and obligations of trust and confidence. A breach of this implied term may justify the employee in leaving and claiming that he has been constructively dismissed: see Post Office v Roberts [1980] I.R.L.R. 347 and Woods v W.M. Car Services (Peterborough) Limited [1981] I.C.R. 666 at 670, per Browne-Wilkinson J.
  1. The breach of this implied obligation of trust and confidence may consist of a series of actions on the part of the employer which cumulatively amount to a breach of the term, though each individual incident may not do so. In particular in such a case the last action of the employer which leads to the employee leaving need not itself be a breach of contract; the question is, does the cumulative series of acts taken together amount to a breach of the implied term. See Woods v W.M. Car Services (Peterborough) Limited [1981] I.C.R. 666. This is the ‘last straw’ situation.”

As to the “last straw” it was held in Omilaju v Waltham Forest London Borough Council [2005] I.C.R. 481 that the quality that a “last straw” had to possess was that it was an act in a series whose cumulative effect amounted to a breach of the implied term. The essential quality of that act was that, when taken in conjunction with the earlier acts on which an employee relied, it amounted to a breach of the implied term of trust and confidence.

As to whether conduct amounts to a repudiation of the contract the ordinary law of contract applies: the cumulative effect of the acts complained of must be such as to indicate that a party, in this case the employer, had repudiated its contract (Brown v Merchant Ferries Limited [1998] I.R.L.R. 682).

Circumstances which render it reasonable for an employee to terminate the contract of employment may constitute ‘constructive dismissal’ and may also justify resignation.

“Entitlement to terminate a contract by reason of the conduct of the employer is a perfectly familiar concept of the law of contract. Like much else it is easy to formulate but can be difficult to apply…The law of contract for this purpose is that where an employer so conducts himself as to show that he does not intend to be bound by the contract of employment the employee is entitled, at his option, either to treat the contract as at an end, and cease performing his part…The question of what is reasonable in the circumstances having regard to equity which has to be considered in cases of unfair dismissal, applies equally to the facts…It is the conduct of the employer which you must look at…But it is not the epithets which his conduct attracts, but whether you are entitled to treat your contract as at an end, and whether if you exercise your option to do so you have been ‘constructively dismissed.” Wetherall (Bond St. W1) v Lynn (E.A.T.) 1

The Employment Appeals tribunal, in deciding any constructive dismissal claim, will apply the tests set out above-the “reasonableness” test and the “contract” test- and decide each case on its particular facts.

One thing that the employee should do in all but the most exceptional circumstances is to firstly exhaust all internal avenues for dealing with his/her grievances, even if he/she believes it will be a futile exercise.