Following the recent Employment Appeal Tribunal (EAT) decision in Billington v Michael Hunter & Sons Limited, employers may be at risk of a successful constructive dismissal claim being brought if they mishandle an offer to employees of an "exit package" with a view to avoiding going through the disciplinary procedure.
Mrs Billington was a bathroom sales assistant. Following a number of customer complaints, she was asked to attend a disciplinary hearing and received a written warning. At a subsequent meeting held to discuss new allegations of unsatisfactory performance, her line manager said that if there were further customer complaints, she "would very likely be dismissed". She was also informed that "should she decide that the job was beyond her capabilities" then she could resign on "favourable terms" (presumably with a compromise agreement). Mrs Billington resigned, claiming constructive dismissal. The Tribunal rejected her claim.
The EAT considered whether there had been a fundamental breach of the implied term of trust and confidence during the final meeting with Mrs Billington. It reaffirmed that there were two critical questions to consider:-
- whether the employer had conducted itself in a manner likely to destroy or seriously damage the relationship of trust and confidence between the parties; and
- if so, whether the employer had done so without reasonable and proper cause.
The EAT said that the only possible conclusion that could be drawn from what was said to Mrs Billington at the disciplinary hearing was that the employer regarded itself as "better off without her" and that any reasonable employee would have considered the invitation to resign as a "vote of no confidence". Mrs Billington’s case was remitted to another Tribunal to decide whether her employer had reasonable and proper cause for the vote of no confidence.
Offering "exit packages" to employees, rather than following a formal procedure, inevitably involves a risk that they will reject the package offered and resign. Following this decision, employees may well succeed with a claim for constructive unfair dismissal. It is important to note, however, that the compromise agreement was not offered to Mrs Billington on a "without prejudice" basis. It is possible that this case would have been decided differently if it had been a "without prejudice" offer.
In any event, it may be more preferable for employers if employees resign and claim constructive dismissal, which is a riskier claim for them to bring than an unfair dismissal claim. Although at first sight this decision is worrying for employers, provided that they handle such discussions with employees well, this decision should not discourage employers from taking proactive steps to resolve issues amicably.
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