Must Principal Reason for Resignation be a Fundamental Breach of Contract in Order to Found Claim of Constructive Dismissal?

The recent EAT case of Logan v Celyn House Ltd involved a claim by a veterinary nurse who resigned from her job because she was not satisfied with the response given to her by her employer when she raised a grievance.  The grievance concerned two issues.  The first was that the employee believed she was the victim of bullying.  The second was because she averred that her employer had failed to pay her contractual sick pay.  Neither grievance was upheld and she resigned claiming unfair constructive dismissal.  She stated that she resigned principally because of the bullying, however the employment tribunal decided, on the evidence, that the bullying was a figment of her imagination and because the alleged bullying was the principal reason for her resignation, her claim of constructive dismissal must fail.  It held this notwithstanding the fact that the employer had, in fact, fundamentally breached the contract of employment by failing to pay her sick pay to which she was contractually entitled.

The EAT disagreed with this judgment for the following reason:

Constructive dismissal arises when the employee resigns in response to a fundamental breach of contract by his or her employer.  There is nothing in the definition which states that the resignation must be wholly or even principally in response to such a fundamental breach of contract.  Therefore, where there is a fundamental breach of contract by the employer, it is sufficient that the employee’s resignation is only in part in response to that breach.  Based on the evidence presented in this case it was held that, whilst the employee’s main reason for resigning was the imagined bullying, she was also resigning in part because of the failure to pay contractual sick pay.  As a failure to pay contractual sick pay amounted to a fundamental breach of contract and this was one of the reasons for her resignation, then her appeal succeeded and she was found to have been constructively unfairly dismissed.

Note:  Employers should be aware that any breach related to a failure to pay contractual remuneration (whether that is wages, a contractual bonus payment, commission or contractual sick pay) is deemed to be a fundamental breach of contract and employees who resign in response to such a breach will have sound claims for both unfair constructive dismissal and unlawful deduction of wages.

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About Belinda Lester
I am the managing director and founder of Lionshead Law a specialist employment law and HR consultancy company.

2 Responses to Must Principal Reason for Resignation be a Fundamental Breach of Contract in Order to Found Claim of Constructive Dismissal?

  1. Michael Caldwell says:

    Constructive termination in the US requires much more than this. The employee must be subjected to conditions so harsh or adverse that no reasonable person could be expected to endure them as a condition of employment.

  2. So it isn’t predicated on contract law then? A constructive dismissal in the UK is essentially a resignation (normally without notice) in response to a fundamental breach of contract by the employer and that would cover the harsh conditions you refer to as there is an implied term of mutual trust and confidence. As remuneration is deemed to be a fundamental contract term in the UK, a breach of a term relating to remuneration could predicate a constructive dismissal claim from the employee (provided he or she resigns in response to the breach)

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