Posted on

Constructive dismissal

Cecil McCarthy

Constructive dismissal

Social Share

One of the matters that the Employment Rights Tribunal will have to adjudicate from time to time is whether or not an employee has been constructively dismissed.
In last week’s article I mentioned that section 26 of the Employment Rights Act provides that it is a dismissal if the employee terminates the contract under which he is employed with or without notice in circumstances in which he is entitled so to terminate it by reason of the conduct of the employer.
Constructive dismissal can sometimes be a fairly difficult concept to apply in practice.
Perhaps the most influential case on the matter, in recent times at any rate, has been the English Court of Appeal case of Western Excavating Ltd V Sharp (1978).
In that case an employee was suspended without pay for taking time off work without permission. As a result he became short of money and requested from his employer an advance of salary against accrued holiday pay. His request was denied. In response, he resigned in order to obtain his accrued holiday pay.  
The industrial tribunal felt that he was justified in terminating his contract because of the employer’s conduct. The decision of the tribunal was overturned by the Court of Appeal. In considering the English equivalent of section 26 above, Lord Denning discussed the concept of constructive dismissal and referred to the tests that have developed in relation to the subject.
Lord Denning said:
“On the one hand, it is said that the words of paragraph 5(2)(c) express a legal concept which is already well settled in the books in contract under the rubric ‘discharge by breach’.
“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. If he does so, then he terminates the contract by reason of the employer’s conduct. He is constructively dismissed.  
“The employee is entitled in those circumstances to leave at the instant without giving any notice at all or, alternatively, he may give notice and say he is leaving at the end of the notice. But the conduct must in either case be sufficiently serious to entitle him to leave at once. Moreover, he must make up his mind soon after the conduct of which he complains: for, if he continues for any length of time without leaving, he will lose his right to treat himself as discharged. He will be regarded as having elected to affirm the contract.
“On the other hand, it is said that the words of paragraph 5(2)(c) do not express any settled legal concept. They introduce a new concept into contracts of employment.  It is that the employer must act reasonably in his treatment of his employees.
“If the conducts himself or his affairs so unreasonably that the employee cannot fairly be expected to put up with it any longer, the employee is justified in leaving. He can go, with or without giving notice, and claim compensation for unfair dismissal.
“In my opinion, the contract test is the right test. My reasons are as follows. (i) The statute itself draws a distinction between ‘dismissal’ in paragraph 5(2)(c) and ‘unfairness’ in paragraph 6(8).  If Parliament intended that same test to apply, it would have said so . . .   (iii) Paragraph 5(2)(c) uses words which have a legal connotation, especially the words ‘entitled’ and ‘without notice’. If a non-legal connotation were intended, it would have added ‘justified in leaving at once’ or some such non-legal phrase.  (iv) Paragraph 5(2)(a) and (c) deal with different situations.  Paragraph 5(2)(a) deals with cases where the employer himself terminates the contract by dismissing the man with or without notice.  
“That is, when the employer says to the man: ‘You must go.’ Paragraph 5(2)(c) deals with the cases where the employee himself terminates the contract by saying: ‘I can’t stand it any longer. I want my cards.’ (v) The new test of ‘unreasonable conduct’ of the employer is too indefinite by far.
“It has led to acute difference of opinion between the members of the tribunals. Often there are majority opinions. It has led to findings of ‘constructive dismissal’ on the most whimsical grounds. The Employment Appeal Tribunal tells us so. It is better to have the contract test of the common law. It is more certain: as it can well be understood by intelligent laymen under the direction of a legal chairman. . . .”
For the most part the contractual test has prevailed.  However, what the cases emphasise is that the issue of what amounts to constructive dismissal will often be a matter on which opinions will differ.
• Cecil McCarthy is a Queen’s Counsel. Send your letters to Everyday Law, Nation House, Fontabelle, St Michael. Send your email to [email protected]