20/08/2010

Recent case highlights constructive dismissal and ACAS code anomaly

The ACAS Code of Practice on Discipline and Grievances at Work in its revised form came into force in 2009 following the repeal of the deeply unpopular statutory Disciplinary and Grievance Procedures. The latest revision of the ACAS guide was published in November 2009.

The ACAS Code, which provides for fairness and transparency, recommends that procedures for handling grievances should be set down in writing. The Code suggests that employees should aim to settle most grievances informally during the course of everyday working relationships. Only if this process doesn’t resolve the matter should the more formal process then be employed.

In cases which reach the Employment Tribunal, if there is a finding against an employer and the employer is found to have failed to follow a grievance procedure when the matter first arose in the workplace, the Employment Tribunal can uplift any award by as much as 25 per cent.

This effectively punishes the employer for failing to resolve the matter before it became a real problem. By the same token, if an Employment Tribunal feels that the employee has unreasonably failed to follow the ACAS Code then any award can be reduced by up to 25 per cent.

The essence of the Code, and indeed one of its objectives, is that employers and employees should always seek to resolve Disciplinary and Grievance Procedures in the workplace.

Unfortunately, some of the case law seems to work to counter this objective, for largely technical reasons. In particular, in relation to constructive dismissal, it does not assist employers who are determined to find a resolution.

In the recent Court of Appeal case of Buckland v Bournemouth University Higher Education Corporation [2010] the Court considered whether or not a breach of contract which could lead to a claim of constructive dismissal could ever be ‘cured’.

For a successful constructive dismissal claim there must be a situation which amounts to a fundamental breach of contract on the part of the employer which entitles the employee to treat the contract as being at an end. The employer’s breach must amount to a repudiatory breach and must be sufficiently fundamental to justify the employee’s resignation. The employee needs to act in response to the breach and mustn’t delay too long before resigning.

The Buckland case considered whether it was possible for the employer to cure the breach and this links directly back to the notion of having a grievance procedure. It might be argued, what is the point of an employer following a grievance procedure if, despite its best endeavours, there is no prospect of legally curing the breach?

Buckland considered both the issue of curing the breach and also whether the range of reasonable responses test was relevant in this situation. The Court concluded that if an employer behaves in a manner which amounts to a fundamental or repudiatory breach of an employee’s contract then a breach of contract has taken place. There is no need to assess the employer’s behaviour by reference to a “range of reasonable responses”.

An example was given of a failure to pay wages by the employer. Such a failure on the part of the employer is almost always a fundamental breach of contract. It is possible for there to be a perfectly reasonable explanation for it that was totally outside the employer’s control. For instance, this could be caused by the default of a major customer in paying what was owed such that the employer’s failure to pay wages was then reasonable.

However, constructive dismissal is a contractual issue and in that example, the failure to pay wages is still a fundamental breach of contract and the reasonableness of the explanation for the breach is irrelevant. The Court said very clearly that to hold otherwise would be to “drive a coach and four” through the law of contract.

Whilst in that example, technically, it would be possible to cure the breach by paying the sum due, if the employer does not have the funds to do so then it is not going to attempt to cure the breach but as a matter of legal principle it is not able to do so in any event.

So in that situation is there really any point in going through a grievance procedure? The answer appears to show the stark contrast between the law of contract and the real life of dealing with people and trying to handle their emotions.

On one level the case is saying “treat your employees badly and you must be ready to accept consequences”. However, the ACAS Code of Practice on Grievances is saying that you can put that to one side and hopefully try and persuade the employee to change their mind.

In Mr Buckland’s case, he followed the internal grievance procedure and the grievance was upheld in all respects. The University argued that because it had upheld it then the breach was completely cured. Mr Buckland argued that it could never be cured and the Court agreed with him.

It seems odd then that we have a situation where employees who have made their minds up to resign after a particular set of circumstances and whose minds will not be changed whatever happens, must still have the employer go through this process.

This may provide food for thought for employers about to embark on a grievance process. Perhaps it might be sensible to have employees sign a clear statement of their objectives at the outset saying what they really want to achieve through this process. Or are they just going through the motions to avoid a 25 per cent discount in the tribunal?

If you wish to discuss this article, or any other employment law issues, please contact Philip Paget on 0113 227 0212 or e-mail: philip.paget@gordonsllp.com