Facts
Mr Shipperley (S) was employed by Nucleus Information Systems (NIS). In 2002, the company fell into financial difficulties and delayed payment of salary to staff, including to S. He was told verbally at the end of November 2002, and subsequently in writing (on 4 December 2002), that he would be made redundant. His notice period was 12 weeks. S accepted he would be made redundant but wanted to leave on 17 January 2003.
However, S gave notice on 6 January 2003 to leave with immediate effect, having received no pay for the previous month’s work. He complained to an employment tribunal of unfair dismissal. He argued that he resigned because of the company’s failure to pay him. Whilst NIS accepted there were arrears of salary owing to S, it argued that this was largely because of action taken by him and two colleagues before his employment terminated. There was evidence that S and his colleagues might have co-ordinated their actions so as to starve NIS of income, in order to enable them to make a low offer to succeed NIS’s then owner in running the business.
An employment tribunal found that S’s employment had not terminated by reason of redundancy. The majority of the employment tribunal (ie two members of the panel) also thought that there had been no constructive dismissal – the purpose of S’s resignation was to enable him and two colleagues to destabilise NIS. The minority of the tribunal (ie one member of the tribunal) disagreed and concluded that there was a constructive dismissal – the primary reason for S’s resignation was NIS’s failure to pay his wages on time.
S appealed. The employment appeal tribunal (EAT) was of the view that there were at least two reasons for S’s resignation – (1) that he had not been paid; and (2) his desire to destabilise NIS so that he and fellow colleagues could purchase the business for a lower price. In any event, the EAT held that focussing on the primary or principal reason did not answer the correct questions which the employment tribunal ought to have asked in determining whether there had been a constructive dismissal.
EAT identifies correct questions to ask in determining whether there has been a constructive dismissal
The EAT identified the questions the employment tribunal should have asked itself:
- Did the employer break the contract and if so, was the breach repudiatory? (this means a serious breach of contract that goes to the root of the employment relationship or which shows that the company does not intend to be bound by one or more essential terms of the contract);
- Was the breach sufficiently serious to justify the employee treating it as entitling him to terminate his own performance of the contract?;
- Was the acceptance in response to the breach?; and
- Was acceptance within a reasonable time?
Whilst the EAT acknowledged that employees frequently have mixed motives in resigning, this does not mean that the act of accepting the breach is any less a constructive dismissal. It therefore concluded that if the employment tribunal thought that any part of the reason for S’s resignation was that he had not been paid his salary, the only conclusion open to it would be that S had been entitled to accept the non-payment as putting an end to his obligation to continue performing his side of the contract of employment.
Can there be a reduction to compensation for contributory conduct in a case of unfair constructive dismissal?
The EAT thought it was possible to find contributory conduct in a claim for unfair constructive dismissal. The correct test of whether conduct is contributory is whether it caused, or contributed to, the dismissal. The test is not whether the conduct is blameworthy in some other respect. The EAT remitted the matter to a fresh employment tribunal.
Comment
Shipperley v Nucleus Information Services clearly reminds us of the correct questions which should be asked by an employment tribunal before establishing whether there has been a constructive dismissal.
Additionally, it shows that even where an employer suspects there are other reasons for the employee’s resignation, as long as any part of his or her reason for resigning is the fundamental breach by the employer, there will be a constructive dismissal. Of course, for employees to be able to claim the remedy of unfair constructive dismissal, they will still normally need to have over a year’s service and it will still have to be shown that the dismissal was indeed unfair.