Can a constructive dismissal ever be fair?
Author: Darren Newman
Consultant editor Darren Newman considers if an employer can ever be successful in claiming that a constructive dismissal is fair in the light of two recent cases lost by employers.
It is one of the quirks of employment law that a constructive dismissal is not necessarily unfair. If the employee resigns in response to a fundamental breach of contract from the employer, then the law treats them as having been dismissed. But, in theory, the employer still has the opportunity to show a potentially fair reason for dismissal and the employment tribunal must then go on to consider the question of reasonableness.
The issue has arisen in two recent cases in which an employee resigned in the course of an investigation into alleged misconduct. In Upton-Hansen Architects Ltd v Gyftaki EAT/0278/18, the employee was accused of taking unauthorised absence and was suspended. She resigned before a disciplinary hearing could be convened and successfully argued that she had been constructively dismissed. The employer had failed to give any good reason for the suspension - there was no suggestion that the employee posed a risk to the business and her attendance at work would not have impeded any investigation. The employment tribunal held that the employer had breached the implied term of mutual trust and confidence.
In Retirement Security Ltd v Wilson EAT/0019/19, a senior employee was called in at short notice to an "investigatory" meeting, which was described by the employment tribunal as an "ambush". She was presented with a number of serious allegations of misconduct, including theft, but not given details of what she was accused of, nor allowed to see any of the evidence that the employer said that it had gathered. The tribunal held that the meeting had been designed to provoke her resignation, which it did, and held that the employer's conduct amounted to a fundamental breach of contract.
In each case, the employer brought an appeal arguing that the tribunal had been too quick to assume that, just because the employee had been constructively dismissed, it followed that the dismissal was unfair. Each appeal was unsuccessful and the decisions of the Employment Appeal Tribunal (EAT) show the formidable hurdles that an employer faces in arguing that a constructive dismissal was fair. The first obstacle is establishing the reason for dismissal. The burden of proof is on the employer to show why it dismissed the employee and that the reason falls within one of the potentially fair reasons for dismissal (capability, conduct, redundancy, statutory ban or "some other substantial reason"). This might at first seem an impossible task. How can the employer show a reason for dismissal when the employee has resigned? The answer, given by the 1985 Court of Appeal decision in Delabole Slate Ltd v Berriman  IRLR 305 CA, is that the reason for the dismissal in constructive dismissal cases is the reason for the employer's conduct that led to the employee's resignation. Rather than ask why the employer chose to dismiss the employee, the question is why the employer acted in such a way as to entitle the employee to resign without notice.
In both the recent cases that was a problem for the employer. Both employers tried to argue that the breach of contract arose from the employee's alleged conduct. But the reality was that while conduct might have been the reason for launching a disciplinary investigation, it was not the reason for the employer acting in breach of contract. In Gyftaki, the employer suspended the employee because it was concerned that her continued presence in the workplace would have demotivated more junior members of staff. In Wilson, the breach stemmed from the employer's desire to provoke the employee into resigning. Neither stands up as a potentially fair reason for dismissal. In Gyftaki the employer had also argued that the dismissal was for some other substantial reason such as to justify dismissal, but the EAT pointed out that an employer needs to be more specific than that because it had not said what the "substantial" reason actually was.
Even if an employer does manage to establish a potentially fair reason for dismissal, the tribunal must then go on to consider reasonableness. Again, the employer is going to be on the back foot given that it has been shown to have been acting in breach of contract. This is especially so if the term that has been breached is the implied term of mutual trust and confidence. Nevertheless, the courts have insisted that there is a distinction between the objective test of whether the employer has acted in breach of contract and the "range of reasonable responses test" used in deciding whether or not the employer has behaved reasonably in dismissing the employee. That was the finding of the Court of Appeal in Buckland v Bournemouth University Higher Education Corporation  IRLR 445 CA, and the EAT in Gyftaki acknowledged that this meant that there could be a fair constructive dismissal even when there was a breach of the implied term of mutual trust and confidence. This is all very well in theory, but in both Wilson and Gyftaki the outcome was that the employee had been unfairly dismissed. The EAT accepted in each case that, given the nature of the employer's conduct, there was no way that a tribunal could find that they had behaved reasonably. The truth is that while there are lots of cases acknowledging the possibility of a fair constructive dismissal, it is much harder to find an actual example of one.
If such cases do exist, they probably involve the employer breaching an express term under extenuating circumstances. For example, it is possible to imagine an employer demoting an employee in circumstances where it would have been fair to dismiss only for the employee to resign and claim that the employer had no contractual authority to impose that penalty. The employee might succeed in showing that they were dismissed, but the employer would be able to show that the reason for the dismissal was conduct and, given that it was trying to be lenient, it had acted fairly. One can also imagine an employer failing to pay an employee in full in circumstances where it is facing insolvency and trying its best to deal fairly with all its employees. An individual employee could resign and claim constructive dismissal, but the employer might be able to argue that the reason for the breach of contract was business necessity falling within the some other substantial reason category and that overall it had behaved reasonably.
Lawyers defending constructive dismissal claims will continue to argue that even if the employee was dismissed then the dismissal was fair. But in the vast majority of cases that will be a forlorn hope. A finding that the employee has been constructively dismissed will almost inevitably mean that the dismissal was unfair and the employers in Gyftaki and Wilson could have saved themselves considerable legal costs if they had just accepted that.