Waiving a breach?

Sometime one reads an employment tribunal judgment and you can do little else than think whether the employment judge was imbibing something untoward when they made their decision since it is, to put it diplomatically, batshit crazy. That comment is, of course, made in jest but reading of the employment judge’s decision in Gordon v J & D Pierce (Contracts) Ltd (2019) that an unhappy employee trying to resolve a dispute through an internal grievance procedure is disentitled to resign and claim constructive dismissal when he is unable to resolve this is a remarkably bad decision. In fact, as is clear by reading the later EAT judgement, the Employment Judge’s decision had support from decisions in the Court of Appeal (albeit other decisions were in conflict with this) so there was some law to back the judge up (just no common sense!).

The core issue in the case (for present purposes) is that when an employer engages in a contractual breach that destroys or seriously damages the contract the employee has a decision, to accept the breach and continue working (this is called affirmation of contract) or to resign in response and allege she was constructively dismissed. But, in reality, that is not the only two choices. An employee could object to the treatment, raise a grievance and carry working until the grievance process completed. That third option is the course of action the ACAS Code on Disciplinary and Grievance Procedures recommends at paragraph 32 that

If it is not possible to resolve a grievance informally employees should raise the matter formally and without unreasonable delay with a manager who is not the subject of the grievance. This should be done in writing and should set out the nature of the grievance.

ACAS Code of Practice on Disciplinary and Grievance Procedures.

In this case that is exactly what the employee did (he only resigned when that grievance was unsuccessful). However, the fact of that complaint was enough for the employment judge to rule that by complaining to the employer what the employee was really doing was to waive the opportunity to resign and instead affirmed his contract. If the act of complaining amounting to an affirmation sounds farcical this is really what the EJ said in the first instance:

the Tribunal considers that, even if there had been a breach of the duty of trust and confidence as at 3 April 2019, the Claimant had affirmed the contract by his actions in continuing to engage in the Respondent’s internal procedures [the grievance].

Taking a step back from this case the position of the employment judge, if followed more widely, would have done great damage to the industrial/workplace relations climate across the UK. If an employee faced with substantial and grievous breaches of contract by an employer wishes to have any legal remedy for those breaches (assuming there is no freestanding legal rights engaged by the breach) then, on the first tier tribunal’s analysis the only realistic option an employee has is to resign. This would be a catastrophic outcome that would only lead to an escalation of adversarial litigation and a further increase in the employment’s tribunal’s already significant caseload.

As I have noted before constructive dismissal is also often a remedy of the rich only. As a matter of policy if the application of a legal test is one that encourages (and arguably necessitates) a wronged employee to resign and launch litigation then that policy is gone astray.

Since the EAT in Gordon dealt with two conflicting Court of Appeal judgements, and gave preference to the most recent (Kaur) it remains to be seen whether this case will be appealed further. However, the judgement is a positive that curtails effect of the employment judge’s encouragement of a avalanche of resignations and constructive dismissal claims. The reasoning in Gordan is – and I mean this in the very best sense – a contractual fudge.

The judgment is that if an employer does destroy the contract by their contract then yes all the contractual terms are no longer binding except insofar as the grievance or appeal procedure is concerned:

Grievance or appeal provisions may be regarded as severable from the remainder of the contract and capable of surviving independently even though the remainder of the contract is properly regarded as terminated through breach. If the employee succeeds in having their dismissal overturned or the outcome in some other way enables the employee to resume employment, it is open to the employee to then affirm the other terms of the contract. If the employee resumes employment the right to claim unfair dismissal disappears …

Although pragmatic considerations are not always a sure guide, it would be unsatisfactory if an employee was unable to accept a repudiation because he or she wished to seek a resolution by means of a grievance procedure. While a breach of contract of contract may have the effect of releasing the parties from their obligation to perform those obligations that are counterparts of one another (having regard to the principle of mutuality of obligation) it should not have the effect of dissolving all obligations

That seems to be to be a sensible and pragmatic solution that means that an employee seriously aggrieved with an employer’s breach of contract may nevertheless try to resolve this through a grievance process and, if unsuccessful (so long as they act promptly) still have a legal remedy by alleging a constructive unfair dismissal. As it happens, the EAT(s)’s decision was of no avail because it also ruled that the employment tribunal had fairly concluded there was no breach of contract in any case.

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