Repudiatory Breaches and Constructive Dismissal
Two recent cases helped clarified the complicated interaction between contract law and employment law when the Employment Appeals Tribunal (EAT) in Atkinson v Community Gateway Association followed the Scottish case of Tom McNeil v. Aberdeen City Council.
The core issue considered in these cases was whether a previous repudiatory breach (a breach of contract where the aggrieved party can choose to end or affirm the contract) by the employee can prevent them from resigning and claiming constructive dismissal (alleging that the employer’s actions amounted to a repudiatory breach of the contract entitling them to consider the contract to be at an end).
Mr McNeil was a manager for Aberdeen City Council who witnessed a sexual incident at work between two co-workers in a relationship. He gave an account of the incident to management and then went on to discuss his account with fellow employees. The couple then complained about Mr McNeil discussing the event and an investigation was undertaken. The investigation spanned a number of months and became particularly indepth and intrusive, stretching back years and requiring Mr McNeil to answer serious allegations including turning up drunk at work. Consequently, Mr McNeil resigned claiming that he couldn’t take any more and that the intrusive investigation breached the mutual term of trust and confidence in his employment contract.
Mr McNeil then lodged a claim for unfair constructive dismissal and was awarded £52,000 by the Employment Tribunal (ET) as a compensatory award, which was reduced by 50% due to his own conduct. His employer successfully appealed to the EAT before the decision was overturned by the Inner House of the Court of Session.
The judgment centred around whether the employer could rely upon the Scots Law doctrine of mutuality of obligations (simply put, you do your bit and I’ll do mine) To claim that Mr McNeil’s earlier misconduct amounted to a continuing failure of his obligation to maintain mutual trust and confidence so he could not therefore rely on his employer’s alleged breach to terminate the contract.
The Inner House recognised the importance of the Scots Law doctrine of mutuality of obligations but stated that it was not relevant in this case. Accordingly, it held that if there is a repudiatory breach which through choice or ignorance the employer ignores and continues the contract, then the contract remains intact. A future breach by the employer will then harm the contract as if the earlier repudiatory breach had never occurred, which may allow the employee to claim constructive dismissal.
Employers may not therefore rely upon historic breaches of contract if or when it suits them, but employees should be aware that their behaviour can still impact their compensatory award with a reduction of up to 100%.