I have become aware that one of our board members has been seriously undermining a senior manager, Tom, for some time by belittling him in front of colleagues at management meetings, telling more junior staff that Tom has no long-term future here, refusing to support Tom’s efforts to win business and culminating yesterday in him calling Tom a “loser” for all to hear in the open-plan office. I think the company has breached Tom’s contract (by breaching the implied term of trust and confidence) and I am now worried that he will claim constructive dismissal.
How long does Tom have before he has to resign claiming constructive dismissal? Before he does this, can the company rectify the situation, by taking disciplinary action against the board member, for example, so that its breach is cancelled out thereby preventing Tom from claiming constructive dismissal?
Advice gratefully received.
Concerned Cathy, HR Manager
You are right to be worried. This behaviour clearly breaches the implied term of trust and confidence and Tom is likely to have a good claim if he decides to leave, for notice pay and unfair dismissal.
Can the party in breach cure that breach?
This situation has been the subject of a recent case: Buckland v Bournemouth University Higher Education Corporation. One of the key decisions from the Court of Appeal in this case was that it is not possible for an employer to cure a fundamental breach of contract. Consequently, a repudiatory breach of contract is not capable of being remedied so as to prevent the employee from resigning and claiming constructive dismissal. Where the employer has fundamentally breached an employee’s contract, the employee has two choices: either “accept the breach” (i.e. treat the breach as terminal and resign claiming constructive dismissal); or “affirm the contract” (i.e. remain in employment despite the breach). After a certain period of time, if the employee has not reserved his rights as regards constructive dismissal, he will be seen as having affirmed the contract by remaining in employment i.e. he will have lost the ability to claim constructive dismissal.
The Court of Appeal in the above case spelt out that the wronged party has an unrestricted choice of whether to treat the breach as terminal, regardless of his reason or motive for doing this. The only thing the employer can do is to invite affirmation (i.e. invite the employee to remain in employment) by making amends.
So, in answer to your second question, the company cannot cure the breach so as to prevent Tom from claiming constructive dismissal. However, it can seek to make amends in the hope that Tom will affirm the contract i.e. decide to remain in employment, effectively waiving his right to claim constructive dismissal.
Timeframe in which to claim constructive dismissal
As regards your first question, that is a tricky one to answer. There are no precise rules as to the timeframe in which an employee must resign as a result of a fundamental breach. The rule is simply that for an employee, it is dangerous not to resign relatively promptly after the breach in question since, if he delays, there is a risk the employer will be able to argue that he has affirmed the contract and thereby waived the breach. If I were advising Tom (and adopting a fairly cautious approach), I would tell him he should resign within 14 days of the breach. However, he may well manage to bring a successful claim if he leaves it longer than this, particularly if he has written to the company complaining of the breach and reserving his position. In the Buckland case, the employee resigned over 4 months after the relevant breach. Also, he resigned in February, such resignation to take effect in July – this was held not to be an affirmation of his contract but in my view, this timeframe is unusually long and may well be specific to the facts of this particular case.
Unfortunately for employers, there is no hard and fast rule here so inevitably there is some uncertainty as to whether a claim can still be made after several weeks (or possibly months) have elapsed or whether the employee has affirmed the contract.
Beware a “manufactured” breach
Whilst not the situation here, beware an employee who is looking to leave the company and wishes to be free of his restrictive covenants. A popular tactic is for such an employee to engineer a breach, either by fabricating something capable of being a breach or by greatly exaggerating something the company has (or has not) done in order to argue that this constitutes a fundamental breach whereby his covenants fall away. Whilst in reality employers cannot constantly be treading on eggshells so as to avoid an act (or omission) which might, if dressed up, be capable of being a breach of contract, employers should be alive to this issue and seek not to give ammunition to any disgruntled employees, or employees known to be looking to leave, which would permit them to walk away without restriction.
The Buckland case mentioned above is helpful to employees in this situation since if the company has arguably committed a fundamental breach, even if the company makes significant amends, this cannot prevent the employee from claiming constructive dismissal, meaning all his covenants will fall away.