Employment Update: Constructive Dismissal

28 April 2008

Unilateral variation of contract terms did not lead to unfair dismissal when employee tried to 'stand and sue' but refused to work under new contract

In Robinson v Tescom Corporation the EAT considered the options open to an employee whose employer wishes to impose a variation of his contract terms: in this case to increase the geographical area of the sales territory for which the employee was responsible.

The employee’s initial response was to write and say that he would work under the terms of the varied job description under protest but that he reserved his right to claim damages for breach of contract and/or a declaration that the employer should abide by the original contract terms.

However, after his internal grievance had been rejected, he indicated that he would not work to the new terms and was dismissed for misconduct for ‘failure to follow a reasonable management instruction’. His claim for unfair dismissal failed.

The EAT said that, apart from simply accepting the varied terms, an employee in this position has four options:

  • He can immediately resign and claim constructive dismissal; or

  • Refuse to work under the new contract and put the onus on the employer to decide whether to dismiss him or not; or

  • As Mr Robinson initially said he was going to do, he can ‘stand and sue’ i.e. accept the new contract under protest (so the contract is not brought to an end) but claim damages for any loss suffered by him as a result; or

  • Claim that the variation is so significant as to bring the old contract to an end, accept the ‘new’ contract and work under it but claim compensation for unfair dismissal from the old one.

In this case, by his actions, the employee had lost the right to claim constructive dismissal and/or breach of contract and his dismissal was fair.

Points to note:

  • Although contract terms can only be varied by consent, employees must act promptly if they wish to object to any proposed variation and usually the only clear cut way in which they can do so is by resigning and claiming constructive dismissal;

  • When wishing to change an employee’s duties, employers should be clear as to whether the nature of the change amounts to a mere variation of the existing contract or a fundamental alteration which might amount to a breach and justify the employee in resigning and claiming constructive dismissal. Each case will depend on its own facts.