Employers are typically aware of the risk of unfairly dismissing an employee when they are considering terminating an employee's contract, but what happens when the position is reversed and it is the employee who terminates their employment and then goes on to say they were left without any other option, potentially being able to bring a claim for constructive unfair dismissal?
In a recent Jersey Employment Tribunal case of Carratu v United Fashions Limited, a long serving and loyal employee claimed constructive unfair dismissal having resigned after encountering persistent problems with receiving his salary on time and recovering amounts he had lent his employer personally.
At the hearing, Mr Carratu produced a schedule of 12 'stopped' cheques for his outstanding wages in the two months prior to his resignation. On the day of Mr Carratu's resignation, his employer had given him an envelope containing cash to cover the sums due to him in respect of half his March and April salary, with the rest remaining outstanding. Mr Carratu had been previously been told that "if he wasn't happy, he should look for another job". Mr Carratu handed in his letter of resignation, collected his possessions and claimed constructive unfair dismissal.
During the Tribunal hearing it also became apparent that Mr Carratu had been asked to use his personal credit card to meet the cost of some stock for the business as a personal favour. Mr Carratu agreed to this but the repayments from his employer were sporadic and were not complete until after his resignation.
It is established in both the English courts and in the Tribunal that in order for an employee to be able to satisfy the test for constructive unfair dismissal, four conditions must be met:
(i) The employer must be in breach of a term of the contract of employment;
(ii) that breach must be fundamental, amounting to a repudiatory breach of contract;
(iii) the employee must resign in response to that breach; and
(iv) the employee must not delay too long in terminating the contract following the breach of contract, otherwise the breach can be found to have been waived and the contract affirmed.
Mr Carratu's representative argued that the Respondent was in breach of two terms of Mr Carratu's contract of employment:
1. The express term to pay his wages on the 5th of every month; and
2. the implied term of trust and confidence because of, inter alia, the repeated and persistent non payment of wages, request that Mr Carratu use his own credit card to pay for stock for the business and the suggestion that Mr Carratu should go and find another job if he was not happy.
In considering whether Mr Carratu had been constructively unfairly dismissed, the Tribunal had regard to the 'Last Straw Doctrine' which is commonly referred to in constructive unfair dismissal cases. Here the employee tolerates various breaches of their contract of employment, until there is a single act by the employer which may not in itself amount to a fundamental breach of the contract of employment, but when looked at in the context of that particular employment relationship, really was the 'last straw' causing the employee to believe that there has been a fundamental breach of their contract of employment.
Breach of express term
The Tribunal found that the failure to pay an employee his/her wages for work done on the employer's behalf in accordance with the terms of a contract of employment amounts to a fundamental breach of contract as this is a basic, fundamental, term of the employment relationship. The Tribunal noted that there are, of course, exceptions to this rule whereby payments of wages is prevented due to technology problems, for example, but in this case it is up to the employer to communicate the delay and reason for it to the employee with a clear indication of when the wages will be paid.
Breach of implied term
The Tribunal formed the view that the employer had crossed the line between employer and employee by asking Mr Carratu to support the business through the use of his personal credit card. Furthermore, although it was argued that there was no intention to upset Mr Carratu when he was told he could go and find another job, these two incidences, when taking in the context of the outstanding wages, fundamentally damaged Mr Carratu's trust and confidence in his employer and constituted a repudiatory breach of his contract of employment.
The Tribunal found that the above four categories were satisfied and that Mr Carratu was constructively unfairly dismissed. There are unfortunately a large number of ways in which an employee may be constructively unfairly dismissed, stemming from unilateral variations of their contracts, treatment by other employees to the nonpayment of wages discussed above.
The first step towards avoiding claims for constructive unfair dismissal is regular and effective consultation with the employee where any potential grievances can be addressed and hopefully remedied. Regularly reviewed employment policies and marinating an appropriate level of transparency will also assist an employer in demonstrating it was acting reasonably in the event it finds itself before the Tribunal.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.