A salutary tale……an employer turns potential grounds for dismissal into a constructive unfair dismissal by trying to do the right thing

In Frith Accountants v Law the employee worked for a small accountancy business. Her performance was considered to be good but over 2012 it was felt that it had declined with her making a number of uncharacteristic mistakes. Her managers were also concerned that her conversation had on occasion seemed incoherent and rambling.  Frith decided to discuss her behaviour and performance with her son. This was out of genuine concern for Law, who was 62 years old, but it was done without discussing the matter with her first or taking any formal step to address her performance issues directly. When Law found out about the conversation with her son, she was horrified and resigned, claiming unfair constructive dismissal. An employment tribunal upheld her claim, finding that the conversation had been a clear breach of the implied contractual term of mutual trust and confidence.

The employer sought to limit the amount of compensation payable on the ground of Law’s conduct. It was argued that it had approached the son only because the employee had refused to accept any criticism of her performance and had continued to make errors. The tribunal held that the dismissal had been caused exclusively by the employer’s fundamental breach of contract and did not make any reduction to either the basic or the compensatory award to reflect the employee’s conduct. It did, however, apply a Polkey reduction on the basis that there was a 40% chance that she would have resigned or been dismissed after a period of eight months following the date of her constructive dismissal.

The employer appealed

The EAT began by observing that it would be unusual for a constructive dismissal to be caused or contributed to by any conduct of an employee because the cause of a constructive dismissal is the conduct of the employer in committing a fundamental breach of the employment contract. This was particularly the case where the breach relied upon was a breach of the implied term of mutual trust and confidence. By definition, that conduct would amount to a breach only if the employer had no reasonable or proper cause for acting as it did. The unchallenged finding in this case was not only that there was a breach of contract by the employer but that there was no reasonable or proper cause for it. The employer had argued that L’s conduct was such that it gave reasonable and proper cause for approaching her son, but this argument had been rejected by the tribunal.

The EAT accepted, however, that a reduction could apply in an appropriate case to a constructive dismissal if the employee’s conduct had contributed to the dismissal to ‘any extent’. The employer argued that it was implicit in the tribunal’s decision that the employee’s conduct was open to criticism. The tribunal had found that the employer’s  motivations were largely good and that the workplace was a friendly and supportive environment. What had caused them to approach Law’s son was he conduct, and that conduct could be said to have contributed to their actions. The EAT rejected this argument. Mere poor performance was unlikely to be sufficiently culpable or blameworthy to constitute contributory conduct, particularly where the employer had not considered formal proceedings to be warranted. The tribunal had been entitled to find that Law’s conduct had not caused or contributed to her dismissal and that there was no basis for a reduction.

That said, when it came to the basic award the issue was simply whether it was just and equitable to reduce the award in view of the conduct of the employee. The tribunal had not addressed this issue, concentrating entirely on what had caused the dismissal. In the event, however, the parties were able to reach an agreement on an appropriate figure for the basic award and so the EAT allowed the appeal on this point and ordered that the revised sum should be substituted by agreement.

As to the Polkey reduction based on a 40% chance that the employment would have ended in any event after eight months, this was a matter of fact for the tribunal to determine. Assessments of this sort inevitably involved speculation and were expressed as a round figure, not easily susceptible to further analysis. In this case, there had been no formal hearings or warnings in respect of L’s performance or conduct, and the evidence was that the employer bore no hostility towards her and provided a supportive working environment. In this context, an assessment of a 40% chance of dismissal seemed high. However, this was a judgement for the tribunal to make and there were no grounds for interfering with it. That aspect of the appeal was therefore dismissed.

This case illustrates the need for the employer to address their concerns with the employee in an appropriate manner, giving her a chance to improve. If she’d then resigned and tried to bring a claim the outcome would probably have been entirely different………….