When is a contract terminated?
Ian Machray considers the requirement of an employee to accept a breach for constructive dismissal.
An employee, Mrs Ure, went on maternity leave during which time she was in contact with her father, the owner of her employer, Chemcem Scotland Limited, regarding various matters affecting her employment. At the end of her maternity leave, she did not return to work and instead initiated Employment Tribunal (ET) proceedings claiming she had been constructively dismissed.
Although she had stated that she did not return to work because her statutory maternity pay (SMP) had been discontinued where Chemcem was entitled to do so, the ET found various other repudiatory acts that justified her decision not to return to work. These were varying her wage arrangement without explanation, failing to pay SMP on time, failing to answer her queries about what she was entitled to and misleading her as to the true position.
The ET further held that Mrs Ure’s failure to return to work amounted to communication of her acceptance of those breaches, even though nothing was said to the employer. Chemcem appealed this decision to the Employment Appeal Tribunal (EAT).
What is constructive dismissal?
Constructive dismissal occurs where an employee terminates their contract (either with or without notice) in circumstances where they are entitled to by reason of their employer’s conduct. In this situation, the employee will be deemed to have been dismissed by their employer.
There are three elements to constructive dismissal.
The employer must be in repudiatory breach of an express or implied term of the employee’s contract.
There are no hard and fast rules on what constitutes a repudiatory breach and often it will depend on the specific context and circumstances of each case. However, the breach must be significant and demonstrate that the employer no longer intends to be bound by one or more of the essential terms of the contract.
Accepting the breach
The employee must accept the breach and resign in response to it.
It is not always necessary for the employee to expressly communicate their acceptance of the breach to the employer, although there must be an overt act which is inconsistent with the subsistence of the contract. The acceptance must also be unequivocal and unambiguous. For instance, an employee’s acceptance may be considered ambiguous where they resign in the heat of the moment.
It is also important that the employee can demonstrate that they resigned in response to the employer’s repudiatory breach, however the breach does not need to be the only cause of the employee’s resignation.
Employee must not delay
The employee must not delay too long in accepting the breach as this may be construed as an election to affirm the contract and the employee will lose their right to constructive dismissal.
The EAT upheld the ET’s decision. Crucially, in relation to whether Mrs Ure had communicated her acceptance of Chemcem’s repudiatory acts, the EAT held that ordinarily a failure to return may not carry this implication, but in the context of this case it did.
Pertinent to its decision was the fact that Chemcem did not contact Mrs Ure asking why she had not returned. Furthermore, Mrs Ure’s return would have meant her father’s new partner coming under her management, a situation the father did not wish to happen. For the EAT, these circumstances indicated the true position that “the Respondent [Chemcem] was hoping and perhaps even expecting her not to return.”
This case offers a useful example of the degree to which the ET will assess constructive dismissal cases in their individual contexts. Often, when an employment relationship breaks down, it can be difficult to establish whether the contract has been terminated by the employee. In this regard, employers are advised to seek legal advice if they are at all unsure.
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