Constructive unfair dismissal: Is it necessary to exhaust the internal grievance process before a repudiatory breach of contract occurs?

The Facts

Ms Nelson (the Claimant) was employed as a teacher by Renfrewshire Council (the Council). The claim arose because of matters during a 13-month period from 7 October 2021 until the claimant's resignation on 7 November 2022. The Claimant felt that the Head Teacher had behaved in an aggressive and intimidating way towards her during discussion about a work-related issue on 7 October 2021, both in the Head Teacher's office and in a stairwell after the meeting.

The Head Teacher's voice was overheard by witnesses to be raised and described as having an 'angry' tone when she was speaking with the Claimant in her office. The Claimant was seen to leave the office looking visibly upset and was followed by the Head Teacher who said to her words to the effect of 'If you've got something to say, say it to my face' as well as 'what we were discussing is confidential.' The Head Teacher was pointing at the Claimant as she did so.

The Claimant lodged a grievance, which was investigated and following a Stage 1 hearing was dismissed. The Claimant appealed the outcome to a Stage 2 hearing. The Claimant’s grievance was again rejected, and the Stage 2 outcome letter reminded the Claimant of her right to appeal to Stage 3. Stage 3 would be the final stage of the grievance and heard by a panel of Council members rather than members of the local authority management team.

The Claimant did not appeal to Stage 3 but resigned with immediate effect. In her resignation letter, the Claimant stated that she had no option other than to resign because of a serious material breach of contract referring to the evidence of first-hand witnesses being ignored, Ms Bell (Stage 1 grievance manager) having admitted that she was not impartial, and this not being taken into account. She brought an unfair constructive dismissal claim.

The Legal Bit

Section 95 Employment Rights Act 1996 provides:

(1) For the purposes of this Part an employee is dismissed by his employer if (and, subject to subsection (2), only if)—

(c) the employee terminates the contract under which he is employed (with or without notice) in circumstances in which he is entitled to terminate it without notice by reason of the employer's conduct.

Western Excavating (ECC) Ltd v Sharp provides that the breach must be a significant one 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.

Malik v BCCI [1998] A.C.20. provides that there is implied into every contract the fundamental term of trust and confidence. It is a fundamental breach of contract for an employer to conduct itself in a manner which impinges on the relationship in a way in which, looked at objectively, is likely to destroy or seriously damage the degree of trust and confidence the employee is reasonably entitled to have in his employer.

Employment Tribunal Decision

The Employment Tribunal dismissed the Claimant’s claims. It held "In contractual terms, I find that there was no breach of the implied term of trust and confidence because although that relationship had certainly been damaged without reasonable and proper cause, the situation had not reached the level of serious damage to, or destruction of, the relationship of trust and confidence. In other words, the degree of damage to that relationship had not reached the level necessary to constitute a breach of the implied term.

I have considerable sympathy for the claimant's position. She was let down by processes intended to ensure that disputes are resolved at an early stage without needing to bring an employment tribunal claim. However, 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. As the authorities set out above emphasise, a breach of the implied term is not established simply by showing that the employer acted unreasonably."

The Employment Appeal Tribunal (EAT)

The Claimant appealed and in upholding the appeal the EAT found that: 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, was an irrelevant consideration when determining whether a repudiatory breach had occurred. It considered the case of Tolson v Governing Body of the Mixenden Community School which stipulated that the only conduct that should be considered when determining whether there had been constructive unfair dismissal should be the conduct of the employer.

Conclusion

This case is a useful reminder that employers may not always be able to rely on a final stage of a grievance process to correct earlier flaws and that employees may successfully bring a claim for constructive unfair dismissal despite not exhausting internal grievance processes. The lack of any appeal may of course be considered when considering any compensation because of the failure to follow the ACAS Code of Practice on disciplinary and grievance procedures.