A breach or a fundamental breach?
Constructive unfair dismissal claims are difficult claims to bring successfully as the burden is on the Claimant to show that there was a fundamental breach that they resigned in response to (promptly).
In the case of Singh v Metroline West Limited, it was found that constructive unfair dismissal could be established even where the employer’s actions were such that it did not indicate an intention to end the employment relationship.
The Claimant in this case, Mr Singh, was invited to attend a disciplinary hearing but was then signed off sick the next day. The Respondent, Metroline West Limited, was of the view Mr Singh’s sickness absence was a tactic to avoid the disciplinary hearing and, consequently, paid him statutory sick pay rather than the company sick pay he was due. During his sickness absence he attended occupational health and there was nothing to suggest his sickness absence was not genuine.
Mr Singh resigned and claimed constructive unfair dismissal on the basis that, among other things, the failure to pay his company sick pay was a fundamental breach of contract.
The Employment Tribunal held that the Respondent had the contractual right to suspend without pay if it thought his absence was not genuine; however, this power had not been exercised. Furthermore, Mr Singh’s contract of employment enabled the Respondent to withhold company sick pay if, following an investigation, it was found that the absence was not genuine. There was no such investigation and no other reason for withholding company sick pay.
Although the Tribunal found that there was a breach of contract, it was not found to be “fundamental”. It held that, by withholding pay, the Respondent’s intention was to encourage Mr Singh to participate in the disciplinary process which was integral to the employment relationship, rather than to indicate it had no intention to be bound by the employment relationship.
Mr Singh appealed to the Employment Appeal Tribunal (EAT) and was successful. The EAT held that the Tribunal had erred by adopting the approach that, for a breach to be fundamental, there must have been an intention by the employer not to be bound by the contract in a manner that meant that it no longer wished to continue the employment relationship.
What is required to establish a fundamental breach is that the employer demonstrates an intention to no longer comply with the terms of the contract that is so serious that it goes to the root of the contract.
The EAT concluded that there was a deliberate decision to withhold pay to which Mr Singh was entitled in circumstances where there were other contractual provisions which would have enabled the Respondent to address its suspicions about his absence. This resulted in a significant reduction in his earnings and was a fundamental breach of contract.
This is a useful reminder to employers in terms of the correct test for establishing the fundamental breach of contract required to pursue a successful constructive unfair dismissal claim but also the importance of exhausting your own provisions and procedures for addressing, for example, suspicious conduct.