Constructive Dismissal: Process and Making Amends

By Douglas Brodie - Posted on 20 August 2024

The scheme of statutory protection for employees established by the law of unfair dismissal (and currently contained in Part X of the Employment Rights Act 1996) allows a claim to be made where there has been a constructive dismissal. Section 95(1)(c) defines dismissal in a manner that includes situations where ‘the employee terminates that contract, with or without notice, in circumstances such that he is entitled to terminate it without notice by reason of the employer’s conduct.’ As a result, the employee who resigns in response to the employer’s wrongful conduct is regarded as having been dismissed for the purposes of an unfair dismissal action. This then allows the employee to challenge the fairness or otherwise of the dismissal before an employment tribunal (ET). In appropriate circumstances, decisions of an ET can be appealed to the Employment Appeals Tribunal.

In my view, the introduction of constructive dismissal was an admirable step. It provides the beleaguered employee with a measure of empowerment and allows them to bring an unsatisfactory situation to an end whilst, at the same, affording a means of access to an employment tribunal. The way in which constructive dismissal is structured and operates is though of very considerable consequence. One barrier that employees must overcome is that it does not suffice that the employer has behaved badly or unreasonably: there must have been not just a breach of contract but one that is sufficiently serious to be viewed as material.

The recent decision in Nelson v Renfrewshire Council [2024] EAT 132 (Nelson) contains a number of points of interest where the law of constructive dismissal is concerned. In particular, it raises the question whether an employee must exhaust the employer’s internal processes before they are entitled to resign. This may be the last thing a deeply aggrieved employee would wish to do.

In Nelson, the claimant had resigned from her position as a teacher with the defender and sought to claim that she was unfairly dismissed. She claimed that her resignation was in response to a breach of the implied obligation of mutual trust and confidence which had been caused by inappropriate behaviour towards her by her head teacher and the manner in which her grievance relating to that behaviour was then handled by the employer. She resigned before the final stage of the grievance process had been undertaken. She then brought a case to the ET.

The ET was critical of the head teacher’s behaviour and the conduct of the grievance process. It was found that she had been ‘poorly treated’ by the head teacher. The conduct of stage one of the grievance process was said to be of ‘poor quality’ and of itself sufficient to amount to a breach of mutual trust and confidence. Stage two of the process was found to be ‘inadequate to detect and correct the earlier bias’ and, as a result ‘the relationship of trust and confidence had been damaged”. The employer’s grievance procedure though had three stages and the ET were confident that the final stage would have been conducted fairly. They went on to hold that the claimant had not been constructively dismissed. This was despite the fact that the ‘claimant had been subjected to unprofessional aggressive and intimidating behaviour. There had been a concerted effort to brush off her complaints and exonerate the wrong doer. There had been two extremely flawed grievance procedures with superficial findings.’ However, they held that ‘at the date of her resignation those internal processes had not been exhausted and the potential of the remaining stages was enough to mean that the relationship of trust and confidence had not been damaged sufficiently seriously to found a claim for constructive dismissal.’

The claimant appealed to the Employment Appeal Tribunal (EAT) who upheld her claim. They held that the ET had erred by taking into account an irrelevant factor: ‘the fact that the claimant did not engage with the third stage of the grievance procedure or that, had she done so, a favourable outcome might have been achieved, is an irrelevant consideration in this context.’ Nelson follows the earlier case of Tolson v Mixenden Community School Governors [2003] I.R.L.R 842 in holding that the only conduct to be considered in determining whether a constructive dismissal has occurred was that of the employer. As a consequence, once a material breach has occurred an employee is entitled to resign and process does not need to be exhausted.

The EAT remitted the case back to the ET to consider whether ‘…without having regard to the failure of the claimant to exhaust the grievance procedure, the conduct found established amounts, individually or cumulatively, to a repudiatory breach of the implied term of trust and confidence.’ 

A decision to the contrary might have prompted arguments that employers had a right to cure a breach of contract; a breach would not then arise until the employer had been given an opportunity to remedy the situation and had failed to do so. In Nelson this might have taken the form of allowing the employer to conduct a fair third stage grievance procedure. In England the Court of Appeal held in Buckland v Bournemouth University [2011] QB 323 that such a right did not exist. The question might be raised whether consideration of the Scots law of contract would lead to a different outcome.

It is in fact the case that the Scots law on breach of contract does contain a nascent right of cure. In Lindley Catering Investments v Hibernian FC (1975) SLT (Notes) 56 at 57, it was said that where a material breach ‘can be remedied so that the contract as a whole can thereafter be implemented, the innocent party is not entitled to treat the contract as rescinded without giving to the other party an opportunity so to remedy the breach’. Subsequent decisions have not departed from this position but, at the same time, have not advanced our understanding and none concern the employment contract. 

The wisdom of such a right applying in the employment context requires careful consideration. I would be concerned that access to constructive dismissal should not become more restrictive than it currently is. As matters stand, the employee will forfeit the right to an unfair dismissal claim if the breach turns out to be less than material and, as a result, will be very hesitant about taking the risk of resigning. The employee's dilemma would be further exacerbated if rectification could also constitute a basis for defeat of a claim. A right to cure may make sense in other contractual contexts but not, I would suggest, in employment.

Nelson accepted the claimant’s argument that, ‘It was not the law that if someone chooses to lodge or pursue a grievance they are required to exhaust the process before any situation of breach of the implied term of trust and confidence could arise.’ This provides clarity on a practical point of some importance in constructive dismissal claims and is to be welcomed; the employee’s path to the ET should not be any more arduous than it needs to be.