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By Michael Scutt, 18/02/2010 10:30 am

Daniel Barnett’s regular news alert brought the case of Aberdeen City Council v McNeill to my attention. It provides a useful reminder about who must be in breach of the contract of employment before an employee can pursue a claim for constructive dismissal.

The facts were these:

Mr McNeill was a long standing employee of the Council. He became embroiled in disciplinary proceedings when his line manager was suspended pending investigation of alleged misconduct of a financial nature.  The Claimant believed he had heard his line manager and a female employee, on two occasions, engaging in sexual activity together.  It appears he was rather indiscreet in keeping this information to himself and was himself suspended for breaching confidentiality, as well as making defamatory remarks about a female colleague.  That same female colleague alleged harassment, sexual harassment and bullying against Mr McNeill.

The Council then started an investigation against Mr McNeill in respect of four other disciplinary matters, including being under the influence of drink on many occasions when in the workplace, failing to act in the best interests of the Council, bullying harassing and sexually harassing female members of staff, and being uncooperative with other departments and colleagues.  Mr McNeill then became unwell and the disciplinary proceedings became protracted and difficult.  Mr McNeill attacked the probity of the investigation.  Eventually, ten months after being suspended, Mr McNeill wrote to the Council tendering his resignation, and stating “I have no trust in the Council as my employer” and various other related matters about the way they had conducted the investigation, which he said was oppressive.

The issue then arose over whether Mr McNeill could pursue a claim for constructive dismissal against the council.   What was the status of Mr McNeill’s behaviour compared with that of the employer?  The Employment Tribunal took a very relaxed view of the allegations of sexual harassment made against the Claimant, dismissing it as “banter” and down-playing the influence of his drinking during office hours.  The Employment Appeal Tribunal took a very dim view of that – “Again the Tribunal gave the impression that they are seeking to minimise the Claimant’s conduct”.   The EAT took the view that both were parties to a contract and thus mutually obliged to perform their obligations, with Lady Smith (at para 87) saying;

“If a party to such a contract is in material breach of one of his obligations he cannot insist that the other party perform a reciprocal term”

This isn’t new law – the same principle was set out in the 2008 case of RDF v Clements all the way back to Thorneloe v McDonald & Co in 1892.  This case is a useful restatement of the various authorities and noteworthy for its trenchant criticism of the Employment Tribunal that heard the case in the first instance.   The EAT held that Mr McNeill had acted improperly and in breach of the implied term of trust and confidence.  Therefore he could not claim constructive dismissal and lost his claim.

Is this good news for employers? On the face of it yes, because it means that an employer faced with a claim by one of its employees that it had repudiated a term of terms of the contract can defeat such a claim if it can show that the employee was in prior breach of the term.  However, there is a risk for employers because the success or failure of this approach will depend upon whether the employer already knew of the employee’s prior breach.  If the employer did have knowledge and did not act on it then it may be held to have “affirmed” the breach, in other words to have accepted the breach and chosen to do nothing about it. In the McNeill case the EAT specifically stated that the Council did not have knowledge of the breaches by the Claimant –they only came to light during the Claimant’s suspension.  If it had the final outcome may have been very different.

If you need further advice on any of the issues raised here, or in connection with any aspect of employment law please contact me on 0207 464 8433 or at michaelscutt@dalelangley.co.uk

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By Michael Scutt, 19/01/2010 10:00 am

Yesterday Ian Barratt of Mind Strengths Ltd published his “Seven Top Stress Management Tips for Employees”.  Today I am publishing my “top tips” for employers hoping to avoid claims for stress at work from being commenced against them.   

First, some background. Stress at work is a complex and wide-ranging subject, touching on many aspects of employment and personal injury law. The claims will arise either under the law of personal injury (in negligence) or under the Protection from Harassment Act 1997 (PHA) or, alternatively for constructive dismissal and/or discrimination.  All four could be raised in the same instance, although it is not possible for an employee to sue in negligence and unfair dismissal unless the circumstances leading to the injury are independent of the facts relating to the dismissal.  Although many employers may feel “under siege” from all the rights that employees have, they should note that the law is not kindly disposed towards employees in this area: stress at work claims are difficult and expensive for employees to pursue successfully.  

No employer can be immune from ever finding themselves facing a claim from an employee, but following the tips below ought to reduce the risk of a claim arising or, if one does, of being successful.  There are many legal aspects to allegations of “stress at work” and care needs to be taken when an employee asserts that the employer has, in some way, caused him/her to become unwell.  Most allegations will state either that the employer has overloaded the employee with work or not provided enough support/resource to do the job properly or that a line manager has bullied/harassed/victimised the employee.  

It is also not uncommon for employees to claim that they are suffering from “stress” when they fall into dispute with their employers or disciplinary/performance management processes are commenced against them.  

How to mitigate the risk of these claims arising?   

1. Adopt best practice  

The Health & Safety Executive publishes a great deal of information on the subject.  In particular it has devised “Management Standards” which “define the characteristics, or culture, of an organisation where the risks from work related stress are being effectively managed and controlled. … The Management Standards cover six key areas of work design that, if not properly managed, are associated with poor health and well-being, lower productivity and increased sickness absence.” There are six management standards covering demands; control, support, relationships, role and change.  The TUC and ACAS also publish useful materials on stress at work.  

2. Be aware.  

Carry out risk assessments of the roles your employees are expected to undertake and the workplace in which the role is to be carried out.  This is not only integral to the HSE’s Management Standards but is a statutory requirement under the Health and Safety at Work Act 1974 (HSWA) and the Management of Health and Safety At Work Regulations 1999 (MHSW).  The HSWA applies to any employer with more than five employees and require “a written statement of his general policy with regard to health and safety at work of his employees”.  The MHSW requires a risk assessment “for the purpose of identifying the measures he needs to take to comply with” his particular statutory duties. Breach of this requirement can make an employer liable at civil law. However, a greater incentive for compliance is that an employer who does carry out a proper risk assessment is going to be better positioned to defeat a claim for stress at work than one who does not because the risk assessment process should uncover any obvious factors potentially giving rise to stress.  An employer will only be liable in negligence if his breach of duty of care to the employee was reasonably foreseeable.     

Take action before it is too late

3. Have a stress policy and adhere to it  

This might include providing employees with access to a counselling service or a telephone helpline. The courts look favourably on employers who do so, but the provision of such facilities won’t be enough on its own to rebut liability.  

4. Act fairly and consistently  

Stress claims can arise from incidents of bullying/harassment and victimisation.  Put in place policies promoting equality in the workplace – and enforce them.  Claims for discrimination can arise, apart from any other considerations over stress and there is no maximum cap for compensation unlike with unfair dismissal claims. We see many claims where the situation has been caused by fellow employees displaying completely inappropriate behaviour in the workplace, or line managers being “over-zealous” in trying to fulfil their roles. Ensure that line managers manage fairly and in a “human” fashion.   An employee suffering bullying at work from other colleagues or line managers may be able to bring a claim under the PHA for “distress” caused.  

5. Contracts of employment (1)   

Ensure that you have the contractual right (either in the contract of employment or the contractually binding section of the Employee Handbook) to require the employee to attend a doctor for the purpose of a medical report.  This can be a useful tool if the employee is off sick for any length of time because it means you can get a medical report from an independent expert rather than relying solely on the letters from the employee’s GP, who will often be very keen to be (too) supportive of the employee.  

6. Contracts of employment  (2)   

They should be drafted so that any entitlement to full sick pay (as opposed to statutory sick pay (SSP)) is in the discretion of the employer or, preferably, full sick pay will not be paid if an employee goes on sick leave immediately after having been asked to attend a disciplinary or performance management meeting.  Employees tend to become well again once they are not being paid.  SSP is payable in most cases (click here for main terms) for 28 weeks at the rate of £79.15.  Click here for more details on SSP.   Amending employees’ contracts of employment can be a complicated process, fraught with challenges of its own.  Please seek legal advice before deciding to do so.  

7. Act decisively  

If a stress at work problem looks like it might be rearing its ugly head, don’t ignore it.  Take legal advice as soon as possible.  

Related posts: Coming Soon … Miserable Monday  

If you are an employer or employee and need advice on your situation please contact me on 0207 464 8433 or at michaelscutt@dalelangley.co.uk.  

 None of the above material (or anything published anywhere on this blog by me or anyone else) constitutes legal advice to you.  You should not  rely on it and if you need legal advice about your situation you should take specific legal advice on your own situation.  I am always happy to provide legal advice via Dale Langley & Co.

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By Michael Scutt, 18/01/2010 10:20 am

As promised last Monday, I am delighted today to welcome my first guest blogger, Ian Barratt (pictured, right) of Mind Strengths Ltd, to present his Seven Top Stress Management Tips on this third Monday of January, the allegedly most miserable day of the year. Ian is a qualified stress management consultant speaker and author.  His book “The Phoenix Strategy”, co-authored with Amanda Robinson was published last October.  Mind Strengths Ltd is a consultancy company offering workplace strress management , wellbeing and support services.  Tomorrow I will look at how employers can minimise the risk of being sued for stress at work by employees. 

 Today, Ian focusses on how employees can manage stress. 

1. Identify and write down your major stressors 

By taking time to find out what is causing you stress, you will be taking a big pro-active step towards managing your problem areas. Start by writing these down, no matter how trivial they may seem. Then, focus on the top 2 or 3 that cause you the most stress impact and work on a plan to deal with these one at a time. Never try to fix all the problems at once or in an unrealistic timescale. You should also now be able to let go of the trivial stressors as these are not so important. 

2. Establish some goals and objectives  

It can be very satisfying to set some personal goals and objectives to help you kick start the New Year. Make these meaningful and achievable as there is little point in setting personal goals that you either get bored with or you cannot accomplish. Make sure that you set your goals over short, medium and long term timescales to keep you fully focussed throughout 2010. 

3. Develop a Personal Relaxation Plan 

A relaxation programme can be as simple as deciding to walk more, to perhaps joining a gym. Even if you take exercise for just 20 minutes a day, this will help your physical and mental wellbeing. An often overlooked benefit of exercising is that our brains release endorphins, which have as “feel good” effect and gives us feelings of euphoria. If a more mundane relaxation programme is your choice of escape, try meditation, yoga or pilates – all of which will teach you a range of breathing exercises that are critical to relieving and beating stress. 

4. Give yourself some thinking time 

We all need some down time occasionally where we can think more clearly about circumstances and events that may be causing our stress levels to rise. Setting time aside to think about these problems will help you to rationalise what is occurring and provide some clarity to help you move forward. If this proves difficult, step outside yourself and look back in as an outsider. You may find this makes things easier as you are viewing the problems from the outside as a third party. Ask yourself “what would I do if I were advising someone else?” 

5. Be positive 

Many stress related problems can be made worse by low confidence and lack of self-esteem. When you are down and depressed, any issue, no matter how big or small, can have a negative effect on the way you feel. Having low self-esteem generally means that you have negative thoughts about the outcome of a particular situation, event or about yourself. Learn to convert any negative thoughts into positive thoughts and positive energy. Write down any problem areas and you will find that the whole situation becomes less threatening on paper. Change your thinking from “I can’t do” to “I will be able to do.” 

 6. Practice good time management 

Time management isn’t for everyone but even when you can apply some of the theory, you will see noticeable differences in the way you run your life and it will help you reduce stress. For example, making a list of your tasks at work is a great start but not very useful if you don’t know how long each task will take, so remember to do this too. Also, prioritise tasks and ensure that you have a clear picture of what you will be doing today and each day of the working week – and stick to your plan! 

7.  Keep a Stress Diary 

The Stress Diary is a fantastic way to keep track of what may be causing you stress and will help you identify any patterns that may be occurring. To make this a meaningful exercise, you should keep the diary for a minimum of 2 weeks as this will enable you to see any trends. Make a note of anything that causes you stress on a scale of 1-10 (10 being high) but only keep scores of 6 and above. Discard the rest as they should be minor stressors – you need to focus solely on the major stressors. You may find some of the findings surprising! Finally, work on a plan to eradicate the problem areas. 

The Seven Top Stress Tips have been compiled by Ian Barratt, founder director of Mind Strengths Ltd. Ian is a qualified stress management consultant, author and speaker, who specialises in identifying and managing stress and improving wellbeing at both a corporate and individual level. 

For further information, please contact Ian on +44 (0)1634 314090 or via email at ian.barratt@mindstrengths.co.uk.  The website contains some additional useful information and can be found at www.mindstrengths.co.uk.

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By Michael Scutt, 18/11/2009 10:30 am

I said 'TUPE, not toupee'

This can be a real headache for employers where they have “inherited” employees following a transfer of an undertaking under the TUPE (Transfer of Undertakings (Protection of Employment) Regulations 2006.  It is quite well known that if TUPE applies to a transfer then if the Transferor (let’s call it NewCo for ease if not originality) dismisses an employee from the transferee (OldCo) for a reason connected with the transfer, the dismissal will be automatically unfair, unless NewCo can show that an “economic, technical or organisational” reason applied entailing changes in the workforce.  TUPE has the effect of transferring all employment contracts and rights from OldCo to NewCo.

However, what is the situation where the TUPE transfer occurred some time ago and NewCo now wants to ensure that the employees from OldCo are on the same pay deal, the same holidays, sick pay arrangements etc?  This presents a problem for NewCo because Regulation 4(4) of TUPE provides that any variation to a term of a contract covered by TUPE will be

“void if the sole or principal reason for the variation is (a) the transfer itself; or (b) a reason connected with the transfer that is not an economic, technical or organisational (ETO) reason entailing changes in the workforce”

So, if the proposed variation is because of the transfer of the undertaking or is linked to the transfer but is not an ETO reason, the variation will not be legally valid, even if the affected employees agree to the change.  On the other hand if the proposed variation is because of the transfer but is an ETO reason then it can take place.  An ETO reason usually, but not always, entails reductions in the workforce but whether the proposed variation will be an ETO reason will usually be a matter for close factual analysis. 

 When employees seek legal advice on this issue it is usually the case that the proposed variation would adversely affect the employees, but it doesn’t have to be the case.  In 2007 the Court of Appeal confirmed that any changes that were beneficial to the affected employees would be binding.

Many people think that if much time has passed since the transfer of the undertaking (OldCo to NewCo) that is sufficient defence, but mere passage of time is not the whole answer.  The real issue is “what is the reason for the proposed variation?”  The fact that many months, or even years has passed, since the transfer is not going to be conclusive on its own. A case involving Dale Langley (my partner’s) previous firm, Langley & Co, called Taylor v Connex South Eastern EAT/1243/99 [2000] held that a lapse of two years was insufficient.  As ever though, as in all cases, they all turn on their own facts: this is a difficult area and legal advice should be taken (especially by employers) before proposing a variation that might fall foul of TUPE.   Even if TUPE is not engaged, an employer that tries to implement a unilateral change in an employee’s terms and conditions e.g. by reducing employee’s pay may find itself facing a claim for constructive dismissal and/or unfair dismissal.  Employers should proceed with care…

If I can assist please do not hesitate to contact me on 0207 464 8433 or at michaelscutt@dalelangley.co.uk.  Nothing contained in this post or anywhere else on this blog constitutes or is intended to constitute legal advice or creates a solicitor-client relationship between me and you the reader.

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By Michael Scutt, 15/10/2009 9:00 am

Or, to be more precise, and rather less brutal, when did your employment terminate?  In technical employment law parlance, what is the “Effective Date of Termination (EDT)”?  This is a crucially important date in cases where employer-employee have fallen out because it is from the EDT that time limits for issuing proceedings at an Employment Tribunal (ET) are calculated. 

An employee usually has three months in which to issue his/her proceedings – e.g. for unfair dismissal or for discrimination claims.  Problems can arise when the papers commencing the claim (called the ET1) are lodged close to the three (calendar) month less one day limit.  The ET is very strict about accepting claims outside the three month limit and will only do so if it was not “reasonably practical” for the proceedings to have been lodged within that time.

A recent Court of Appeal case, called Gisda Cyf v Barratt, was argued over this issue.  The Claimant’s employers informed her of her summary dismissal on grounds of her “inappropriate conduct” by RECORDED DELIVERY letter on 29^th November 2006.  The letter was signed for by a relative but the Claimant herself was away from home for a few days.  She did not read it until her return home on 4^th December and she did not issue her ET1 until 2^nd March 2007.  An issue then arose as to whether she was in time or not.  On the basis of the date of the letter and delivery to her, she was not.  But, if her EDT was the date she read it then she was.  The CA took the latter view on the grounds that the employee had to be certain of the EDT.  Therefore she could pursue her claim and the employers had to expend time and money in defending it.  The decision was not unanimous though:  it was a three man court and the result was 2-1 in favour of Ms. Barratt.

This being the law, you wouldn’t expect the same rule to apply on constructive dismissal, i.e. where the employee resigns and leaves there and then.  The EDT in that case is when the letter is physically received by the employer (such as the post-room) and not the relevant line manager or HR officer. 

Resignations by fax will take place when the fax is received by the employer’s fax machine and not when subsequently read.  The same rule will presumably apply to email transmissions because the common thread running through these cases is that the employee must have certainty of when the EDT is and this can only be achieved through reliance on the date of delivery not date of reading.

The moral for employers here is don’t dismiss purely by way of a letter.  Get the employee into a meeting, give the news orally and then confirm it in writing, preferably by handing the letter to the employee at the same meeting.  The lesson for employees (and their advisers) is don’t leave issuing proceedings until the last minute.

As ever, if you need advice on any of these issues, call me on 0207 464 8433 or email me at michaelscutt@dalelangley.co.uk

(The ELA Briefing magazine (Vol 16 No. was invaluable in preparing this post.)

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By Michael Scutt, 05/10/2009 3:49 pm

Kevin Keegan has won his case for constructive dismissal against former employers Newcastle United, being awarded £2mn by the Premier League’s Manager’s Arbitration Tribunal.  He left the club in September 2008 after falling out with them over the purchase of a player Ignacio Gonzalez (who?) against his wishes. 

Two issues arise from the case. Firstly, although the BBC website report does not go into the technicalities of Keegan’s case I would guess that he claimed the acquisition of Gonzalez constituted a fundamental breach of the implied term of trust and confidence between employer and employee. After all, if the manager doesn’t choose the players who does (probably a good question to ask in respect of Chelsea and several other clubs from time to time come to think of it)? Secondly, Keegan claimed stigma damages – £16.5mn of them – on the basis that he would not obtain further employment in football until he retired at 65.  More on this further down.  

Constructive dismissal is a claim for breach of contract.  It isn’t necessarily a claim for unfair dismissal, but it will be wrongful dismissal.  Keegan was reportedly on a three year contract worth £3.5mn per annum and had approximately three years to run.  It would be interesting to read the full report (if available, which I’m sure it won’t be) to find out what claims he put in and why he was awarded a fairly low figure, in relation to the potential size of the claim.  The panel probably thought he could obtain alternative work elsewhere within the unexpired portion of his contract and would thus mitigate his loss.  He was reportedly seeking £25mn as compensation for his losses until retirement at 65.  It is further reported that his contract placed a ceiling of £2mn on the amount of compensation he might be awarded in the event the parties fell out.  I can only assume that he pressed on with his claim for £25mn on the basis that the repudiatory breach of contract caused all terms in the contract, including the compensation ceiling, to fall away, leaving the field open to him for a bigger claim.  

Most cases of constructive dismissal don’t involve anything like those numbers, but the legal principles are the same whether you are the manager of a football club or working in an ordinary office.  To succeed with a claim an employee will need to prove that the employer repudiated a term or terms in the contract of employment in some way and that breach was so serious that it discharged the contract.  The employee then has to accept the repudiation by resigning in response to it and this is where many claims go wrong because the employee either waits too long (and “affirms” the breach) or doesn’t make it clear that they are resigning as a response to that breach.

For most people constructive dismissal is a big step to take because it usually means leaving without any notice monies or compensation; they have to be argued or litigated over later on.

Stigma damages – is a fairly unusual type of claim and, no doubt, the Geordie hordes will be less than thrilled that their “Messiah” now feels he has been tarnished by his association with them. It is a species of claim that arose out of the BCCI litigation in the last decade when a Mr Malik, who had worked for them for several years claimed that he would find it hard to get another job within the Financial Services industry because BCCI was known to have been operating fraudulently.  The Court of Appeal allowed Mr Malik to succeed with his because it said that there was an implied term in the contract of employment that the employer would not run a corrupt or dishonest business.  Sam Wallace, a football writer in today’s The Independent gets very steamed up at Keegan’s “greedy” claim.  Leaving aside the morality of the claim, or otherwise, I fail to see how Keegan ever hoped to succeed with the claim.  

 Always take legal advice before claiming constructive dismissal.   If you need any advice on these issues please call me on 0207 464 8433 or email me at michaelscutt@dalelangley.co.uk

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By Michael Scutt, 18/09/2009 2:54 pm

Employers have to repay sick pay

Some good news for employees came out last week with the decision by the European Court of Justice in Pereda v Madrid Movilidad SA that says if an employee is sick whilst on holiday, they can retake the holiday later on or carry the days lost over to the next year.

Not surprisingly employers’ representatives are unhappy about it as it places additional burdens on them. It also increases the risk of unscrupulous employees taking advantage. No guidance is offered by the ECJ on how this could be policed. Employers can only insist on a sick note from GPs after seven days absence.

Costs Awards in Tribunal

A while ago I wrote about the case of Daleside Nursing Home v Mathew which dealt with the issue of when costs should be awarded against a party by an Employment Tribunal. A recent case has now followed that decision. In Dunedin Canmore Housing Association Limited v Donaldson, a case before the Employment Appeal Tribunal (EAT) in Edinburgh it was held that the Claimant (who was representing herself) had lied under oath and the Tribunal should have awarded costs against her. In particular the Honourable Lady Smith said;

The issue was not whether a lay person could reasonably have been expected to understand the law. It was whether she had or had not, in simple human terms, approached the essential factual matters that lay at the heart of her case honestly and reasonably. She had not done so and these are exactly the sort of circumstances where a Tribunal has a responsibility to make clear that it is quite unacceptable to cause expense to another party by bringing proceedings on that basis.

Be warned!

Notice Monies and Constructive Dismissal

Here is some good news for employers. The Court of Appeal (CA) has recently overturned the EAT’s decision in Stuart Peters v Bell which had said that an employee who claimed constructive dismissal from his employer and then went on to work for another employer during the notice period they would otherwise have served did not have to give credit for the monies earned. This has been the law, since 1972 case of Norton Tools v Tewson. Effectively the employee could get his salary twice for that period, which was something of a windfall for him. That has now been overturned by the CA, but only insofar as constructive dismissal cases are concerned. So, if an employee claims constructive dismissal, leaves the employer without serving their notice and finds alternative work elsewhere, the employer won’t have to pay the notice monies due to the employee during that period.

Norton Tools is still good law in other respects and hasn’t been completely overturned.

Please contact me on 0207 464 8433 or email me at michaelscutt@dalelangley.co.uk if you require further advice.

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By michaelscutt, 24/07/2009 9:39 am

This post isn’t about Freddie Flintoff bowling 5-92 to defeat the Aussies at Lords (a very constructive dismissal in my view) but, sadly, is about some recent cases on the law relating to constructive dismissal.  The recent case of Bournemouth University Higher Education Corporation v Buckland [2009] EAT whilst not being as newsworthy as this week’s actions at Lords is, nevertheless, important stuff on the difficult topic of constructive dismissal.  In my experience few topics cause as much confusion or are as overused as constructive dismissal.  Every second client thinks they have or are about to suffer it.

So, what is it about? The definition provided by the Employment Rights Act 1996 s.95(1)(c) is that constructive dismissal occurs when an employee “resigns in circumstances such that he is entitled to terminate his [contract of employment] without notice by reason of the employer’s conduct”. In other words the employer commits an act (or even fails to do something that he said he would) and the employee’s response is to resign in protest. The breach doesn’t have to be of an express term of the policy (like a failure to pay salary, for instance): implied terms can be breached and the usual one that gets raised with constructive dismissal is that the employer has breached the implied term of trust and confidence.

The employer must be said to have committed a repudiatory (i.e. fundamental) breach of contract – it must be more than just unreasonable behaviour by the employer: it just go to the heart of the employment contract.  This is called a WRONGFUL dismissal (which is NOT the same as an UNFAIR dismissal).  If the employee then resigns in response to this breach he is said to have ACCEPTED the repudiatory breach.  The contract is then discharged and the employee is free of all obligations under that contract.  On the other hand, if the employee doesn’t accept the breach or resigns over some unrelated issue he may be said to have AFFIRMED the breach.

For an employee claiming constructive dismissal is a big step.  The burden of proof is on the employee to (1) show that the employer was in breach, (2) that it was a fundamental breach, and (3) that he (the employee) resigned in response and (4) the employee mustn’t delay in acting.  Effectively the employee resigns and walks out without his notice monies or any other compensation because the employer won’t pay notice monies to an employee who walks out.   I often call it, perhaps rather melodramatically, the “nuclear option”. 

A constructive dismissal is not always an unfair dismissal. It will be if the employer cannot show a potentially fair reason for the dismissal. The ERA lays down five potentially fair reasons – (1) redundancy, (2) capability, (3) conduct, (4) frustration of contract and (5) some other substantial reason.  The employer needs to show that the action he took or threatened comes within one of these five categories. If he can’t then the dismissal is unfair.  If he can show that the reason for dismissal was within one of these categories then he must then prove that he (the employer) acted reasonably in relying upon that reason for the dismissal.

How is that established? The case of Buckland (above) dealt with this issue.  In most unfair dismissal cases before an Employment Tribunal the ET will be asked to consider whether employer’s actions were within the “band of reasonable responses” test – which is not where the ET decides what decision it would have taken if it had had to make that decision but whether the action the employer took was a reasonable response to the employee’s situation.  Buckland confirms that the band of reasonable responses test is NOT relevant in cases of constructive dismissal.  This has been an issue for some time in this area.  What is the relevance to employees?  This decision confirms that “mere” unreasonable conduct by the employer is not sufficient to establish constructive dismissal: there must be a breach of contract that goes right to the root of the employment contract and shows that the employer no longer wished to be bound by its terms.  This raises the bar for Claimants in an already difficult area.

The second recent case that grabbed my attention is Wishaw and District Housing Association v Moncrieff EAT.  It illustrates another aspect of the constructive dismissal situation: what if you don’t have one particular act or event constituting the repudiatory breach, but a series of events leading up to a “final straw”?  This case dealt with that issue and confirmed that the final incident has to be more than trivial.  The cumulative effect of all the breaches has to amount to a fundamental breach of contract. 

I would urge any employee contemplating claiming constructive dismissal to get legal advice as a matter of urgency before taking (of failing to take) any action.  Don’t rely on this post either!  Constructive dismissal is a complex subject and you need to look carefully at each case on its own merits before deciding what to do.

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By michaelscutt, 24/06/2009 9:00 am

BA has been in the news … again and, as usual, for all the wrong reasons. The company formerly claiming to be the world’s favourite airline has now asked 40,000 of its staff to not just take a pay cut but to work for nothing for a month to ensure the company’s survival.  Now there’s an enticing offer … not.

The offer to staff involves them either working without pay for up to one month, or taking unpaid leave for that time.  The deduction would then be taken out of their salary over a period of three to six months.  Willie Walsh, BA’s Chief Executive, has agreed to take zero pay for July but as his monthly salary is reportedly £61,000  he will have enough saved up not to need to worry about how to pay the milkman. I did hear on the radio (although I haven’t found it again in print anywhere) that some of the affected pilots were being offered equity in the company to make up for the shortfall, which could be a good bet, but why isn’t it being offered to all staff? 

Enough of this: what should an employee do when faced with this dilemma? Very few employees love their jobs enough to want to work for nothing.  On the other hand if accepting a temporary moratorium on pay would prevent redundancy then the issue gets more complicated. Even if true, will the salary sacrifice make much difference? Many of those affected will already be hard pressed paying their mortgages and credit card bills. Will building societies and credit card companies also agree to a reduction in payments to them? My guess is no. If I were an employee of BA my first thought would be to assess whether I believed Willie Walsh when he said that the company’s future was at stake.  On balance, BA should probably be applauded for trying to find a solution other than just slashing headcount.

The legal issue is really the same as I discussed in my earlier posts on pay cuts vs. redundancy.  An employer faces some tricky legal issues when proposing a pay reduction or, as here a complete pay cut. An employee, if not persuaded by management’s declarations of poverty, could claim constructive dismissal if the pay cut is implemented without their agreement.  Under contract law, any unilateral variation of the terms of a contract is a breach of contract.  When, as here, the term in question is fundamental to the very essence of the contract, a breach can be said to be “repudiatory”, meaning the employee can treat him/herself as being released from all obligations under the contract if he/she chooses to do so.   

An employer would be well advised to consult with employees if it wants to impose a pay cut or pay moratorium.  If more than 20 employees are involved then at least one month should be allowed for the consultation process, or three months if more than 90.  The reason for this is that if any employees don’t want to accept the proposed reduction, they could claim not only constructive unfair dismissal but also a “Protective Award” of one or three month’s pay depending on the number of employees involved. It follows from this that there is little or no difference, from an employer’s point of view, in conducting a redundancy consultation process or a pay cut consultation process. An employer that consults over a proposed pay cut will probably be able to demonstrate (to an Employment Tribunal) that it has tried to take all steps to avoid redundancies if that later becomes necessary.

The employer needs to move cautiously and carefully if it is to avoid claims by disaffected employees.  If any “sweeteners” can be given to staff (such as equity, or additional holiday) that is more likely to succeed.  If an employee refuses the pay cut/moratorium the employer could potentially dismiss that employee and state the reason for the dismissal as being “some other substantial reason”, which is one of the potentially fair reasons for terminating an employee’s employment under the Employment Rights Act, but a claim for unfair dismissal will probably follow if that employee has more than 12 months continuous employment experience.

Advice to both employers and employees: take legal advice before going down this route.  If anyone out there reading this works for BA please do get in touch and let me know your views and decision.

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By michaelscutt, 17/04/2009 11:07 am

I posted on this subject a while ago and it has received such a lot of visits I thought I better give my public more of what they want. It also gives me an opportunity to provide an update on the poll I set up below on this issue. At the moment 57% of respondents would elect a pay cut and 31% would take redundancy.  The remaining 11% didn’t know.   Whether those results will change after this post wil be interesting to see.

In my previous post on the 27th February I wrote that the risk to an employer in reducing or attempting to reduce salary was that it might constitute a breach of contract and could lead to litigation if the employee didn’t agree  to the cut.  A claim for breach of contract and/or unlawful deduction from wages  and/or constructive unfair dismissal could be the result.  Only employees with more than one year’s service can claim unfair dismissal, but any employee can claim for breach of contract or for unlawful deduction of wages, which is what an unagreed reduction in pay would be.  The crucial issue, therefore,  is to get the agreement of the employees concerned and, if this is obtained, many of the problems fall away. How does an employer go about this?

By consultation is the answer. An employer needs to approach the matter with sensitivity and it needs to set out to the employees concerned the reason for the proposal and to show that it has considered other options to a pay cut.  Employees need to be given time to consider the proposals  (within a defined timetable) and to put forward any suggestions they have, which should then be given due consideration. In all probability, other options to a  pay cut will include redundancy and the employer will need to set out the business and financial reasons for suggesting the pay cut.  Other options though might include laying off employees, reducing hours and reducing benefits.  A pay cut is likely to be more palatable for employees if it is stated to be a temporary reduction, e.g.  for six months pending further review by employer and employee.

In all these circumstances the employer will be aided hugely if the employment contracts it provides to its staff contain a clause that allows the employer to make amendments to the terms of the contract (most don’t it has to be said).  In the absence of such  a clause an employee who is not minded to accept the reduction in pay, or alteration to their hours, will be strengthened in any claim for breach of contract.  That risk does not disappear even if there is such a clause because the employer must act reasonably when seeking to amend the contract, but it does give the employer scope for manoeuvre.  In other words, if the employer consults properly and frankly with affected employees  and can demonstrate the necessity for making  pay cuts, it should reduce the risk of being successfully sued for breach of contract by a disgruntled employee.  

An employer may be required to consult collectively with any recognised unions at the workplace or to get employees to elect representatives to consult on their behalf.   I covered this point in my previous post.

Assuming that agreement is reached with employees, the employer should then  get the affected employees to sign a letter confirming their agreement to the reduction in pay.  The letter should set out the company’s reasons for imposing the pay cut (ie to avoid redundancy), refer to the meeting(s) with the employee during the consultation process and ask them to sign and return a copy to signify their acceptance.   This isn’t guaranteed to prevent claims against the employer but it should help to minimise the risk of successful claims being made.  In the current economic climate, the majority of employees will probably accept a pay cut rather than take the risk of being out of work altogether.  

By the way, I mentioned “lay-offs”  above.  If an employer wants to “lay off” staff it should proceed with care  and take legal advice before doing anything; there are many pitfalls and can lead to claims for breach of contract and constructive dismissal. A lay off is where an employee is, effectively, suspended from work without pay. I will write about lay-offs in a future post.