Employment Law Cases
Constructive dismissal and the fundamental breach
A fundamental breach of contract can be established even where the employer’s actions do not indicate an intention to end the employment relationship.
Mr Singh was invited to a disciplinary hearing by his employer. The following day he was signed off sick by his GP. He was examined by OH but they didn’t suggest he was not sick. He was contractually entitled to sick pay which could be stopped if a thorough investigation found an employee wasn’t sick. His employer believed he was using his sickness to avoid the disciplinary hearing. It decided to pay only SSP rather than contractual sick pay – to encourage him to participate in the disciplinary process. Mr Singh resigned and brought a claim for constructive dismissal, alleging, among other things, that the failure to pay him company sick pay was a fundamental breach of contract.
A tribunal held that ceasing contractual sick pay was a breach of Mr Singh’s contract – there was no investigation or other grounds on which company sick pay could be withheld. However, this breach was not fundamental - given that there was no intention by the employer not to be bound any longer by the employment relationship (in fact quite the opposite). Mr Singh appealed.
The appeal was allowed and sent back to the tribunal to consider whether the other elements of a constructive dismissal claim were made out.
The tribunal here had got the test for a fundamental breach wrong. Rather, the test for fundamental breach focuses on an intention no longer to comply with the terms of the contract, in circumstances where what the employer does is so serious that it goes to the root of the contract. Such a test does not require an intention no longer to continue with the employment relationship. It might often be the case that an employer intends to continue with the employment relationship but in a manner which evinces an intention not to comply with the contractual terms.
Here there was a deliberate decision to withhold pay to which Mr Singh was entitled, resulting in a significant reduction in pay, in circumstances where there were other contractual provisions which would and could have allowed the employer to deal with suspicions about his absence. The only possible conclusion was that this was a fundamental breach.
This case was a useful reminder of the tests to be applied in constructive dismissal.
Generally, any reduction in pay will be found by a tribunal to be a fundamental breach of contract. However, it does not follow that all breaches of contract will be regarded as fundamental.