Facts Mr Atkinson, who was a Resource Director at Community Housing Association “the Association”, was suspended by the Association while it investigated a £1.8 million overspend.
The Association’s investigation resulted in Mr Atkinson being invited to a disciplinary hearing. However following disagreement about procedure and postponement of the hearing Mr Atkinson resigned before the disciplinary process concluded. Mr Atkinson then brought a number of claims at the Tribunal, including a claim of constructive unfair dismissal.
The Tribunal held that Mr Atkinson was barred by law from claiming to have been constructively dismissed because of his own prior material breaches of contract.
Mr Atkinson appealed.
Law An employee is entitled to claim unfair dismissal where they terminate their contract, with or without notice, by reason of the employer's conduct (section 95(1)(c), ERA 1996). Therefore, to establish a constructive dismissal there needs to be:
- A material breach of contract (actual or anticipatory) by the employer?employee?
- An election by the employee to accept the breach and treat the contract as at an end. The employee must resign in response to the breach
- The employee must not delay too long in accepting the breach, as it is always open to an innocent party to "waive" the breach and treat the contract as continuing
There is inconsistency between the current leading authorities on whether an employee who is in material breach can rely on a subsequent breach by their employer for the purposes of resigning and claiming constructive dismissal.
Decision The EAT upheld the appeal by Mr Atkinson. Having reviewed the existing authorities the EAT stated that the correct position (where one party commits a material breach of an obligation and the other party does not accept that breach as bringing the contract to an end) is that the contract continues.
The EAT also stated that where the party with the right to end the contract did not do so and was itself in material breach of contract, simultaneously or subsequently, it would be open for the party that was originally at fault to accept that breach and end the contract.
Comment Fraser Auld, an associate in our employment team comments that: “This case highlights the interaction between employment law and the law of contract. Unilateral termination of contract in response to the other party’s material breach of contract is not a concept limited to employment law, it applies in all contracts. However, regarding employment it could lead to unsatisfactory results for employers, for example an employee receiving compensation for a constructive dismissal claim where the employer could have dismissed them for gross misconduct.
“The Tribunal deals with this potential unfairness by making a deduction from any constructive dismissal award of compensation. In circumstances where the employer can establish that it would have been able to fairly dismiss the employee for gross misconduct the deduction can be up to 100% of the total award.”
