Employment Update: Constructive dismissal

23 May 2007

Where the employer is in repudiatory breach of contract, the employee may resign and claim constructive dismissal, even if he or she has other reasons for leaving.

However, when assessing compensation, contributory fault may be an issue even in a constructive dismissal case.

In Shipperley v Nucleus Information Systems UKEAT/0340/06 20/2/07, the employer was in financial difficulties and the employees were already faced with the prospect of redundancy in the near future. The claimant in this case took the initiative and resigned, along with two others, because he had not been paid his salary. But they resigned as part of a co-ordinated attempt to force the sale of a company by leaving it unable to obtain any further business. He and his colleagues hoped to pick up this business for themselves. He claimed constructive dismissal.

The Tribunal decided that because there were two reasons for his resignation and only one of them was based on the conduct of the employer, his claim failed. He appealed to the EAT which has now remitted his claim for rehearing.

The key point for the EAT was that an employee may still have a constructive dismissal claim, even if he has mixed motives for his resignation. If the employer is in repudiatory breach of contract and he has resigned in response to that breach, it does not matter that part of his motivation may have been to gain some other advantage.

The EAT went on to say that when assessing compensation, although it would be very rare for a Tribunal to find that an employee had contributed to his dismissal in a constructive dismissal case, it was not entirely impossible. This might be such a case.

Points to note:

  • Where employees are disaffected and/or on the verge of leaving their employment, employers should take great care not to put themselves in repudiatory breach of contract. Failure to pay salary is a classic example of such a breach. This will leave the employee free to resign, walk free of any post-termination restrictions in the contract of employment contract, and claim compensation for constructive dismissal – even though, as in the case of Shipperley, they may have had their own reasons for wanting to resign at that point anyway.

  • Employers should take immediate legal advice if an employee claims constructive dismissal. A constructive dismissal can only succeed if the employee resigns quickly in response to the repudiatory conduct of the employer. Strategic decisions have to be made very promptly as to how such a claim is to be handled.

  • Employers can take some comfort from the judgment in Shipperley that, even where a constructive dismissal claim succeeds, the employee may have his or her compensation reduced to the extent that it can be shown that they also had their own motives for wanting to resign.

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