Is a constructive dismissal always unfair?

Was an employee who resigned as a result of a restructuring exercise subject to constructive unfair dismissal?

Lodders employment law specialist examines a recent case.

It is often assumed that a constructive dismissal is by definition unfair, which is not always correct, as the appeal case set out below illustrates. It can be very costly to bring or defend a constructive unfair dismissal claim. Obtaining legal advice can help you weigh up the merits of pursuing or defending such claims.

Background

The recent case of Argos Ltd v Kuldo Appeal No. UKEAT/0225/19/BA (2nd July 2020) involved a restructuring exercise in which the employer sought to place the employee into a new role and therefore did not treat her as redundant. The employee had been advised by the employer that her role was at risk of redundancy, but she was to be “mapped” into a new role, on the basis that there was a difference of not more than 30 percent between her old role and the new one.

The dispute

 The employee did not believe the new role was suitable for her, as she did not believe it to be 70% similar to her existing job. She considered it to be a role with lower status, fewer senior responsibilities, and a change of job content. Therefore, she asked the employer to confirm that her employment was finishing on grounds of redundancy. When the employer refused, the employee resigned, and brought claims in the Employment Tribunal of constructive unfair dismissal, wrongful dismissal, and a claim for a redundancy payment.

Employment Tribunal Decision

The Employment Tribunal found that the Claimant had been subjected to constructive unfair dismissal, but it made no specific findings in relation to her wrongful dismissal and redundancy payment claims. It found that the new role was significantly different to the old role. It also found that the employer had breached the implied term of trust and confidence when it failed to consult, it had failed properly to assess the roles, and it had failed to properly address the employee’s grievance and appeal.

The employer appealed the decision to the Employment Appeal Tribunal. The grounds included (1) the Employment Tribunal, having found that there was a constructive dismissal, assumed that any constructive dismissal would be unfair, and (2) the Employment Tribunal misdirected itself, misapplied or misinterpreted the law in finding that the claimant’s new role was not a suitable alternative role.

Employment Appeal Tribunal Decision

The Employment Tribunal Appeal found that the Employment Tribunal was entitled to find that the employee had been constructively dismissed. However, in finding that the dismissal was unfair, the Employment Tribunal had failed to direct itself that this was a separate issue, failed to address the issue of reason for dismissal and fairness, and failed to give proper reasons for its conclusion that the dismissal was unfair.

There was, in fact, no disagreement between the parties that, if there was a dismissal, the reason was redundancy. The case would be remitted to the same Employment Tribunal to determine whether the constructive dismissal, for which the reason was redundancy, was fair in all the circumstances; and it would be determined alongside the claims for wrongful dismissal and for a redundancy payment.

Is constructive dismissal unfair by definition?

Although it is often assumed that a constructive dismissal is by definition unfair, it is clear there are cases such as this one, that prove this to be untrue. However, the case highlights the importance in any restructuring exercise, of proper consultation and assessment of roles, and of course the proper handling of any employee grievances and appeals.

More information

Lodders’ team of employment solicitors offer accurate, focused, and solution-based legal advice to a wide range of clients. We have forged an excellent reputation for advising SMEs, publicly owned companies, charities, and other bodies, as well as all levels of employees in respect of all manner of employment law-related issues.

If you need any advice on restructuring, redundancy, or any other employment-related matter, please contact our Employment team.