Employer's intent to end employment relationship not necessary for constructive dismissal

Morton Fraser Associate Andrew Gibson
Andrew Gibson
Senior Associate
29 June 2022

In layman's terms a constructive dismissal is considered to be where the actions of the employer indicate that they no longer wish to be bound by the terms of the contract of employment.  The case of Singh v Metroline West Limited demonstrates that that does not equate to the employer having an intent to end the working relationship.

The claimant was signed off sick the day after being invited to a disciplinary hearing. While absent he was examined by occupational health who did not indicate that the illness was not genuine. Despite that, the employer was suspicious that the claimant was simply attempting to avoid the disciplinary hearing. The employer's contract allowed them to withhold company sick pay if, after investigation, absence was found not to be genuine.  However, no such investigation had been undertaken. The company also had a contractual power to suspend without pay if it thought the absence was not genuine, but it had not exercised this power. Instead, rather than paying the contractual sick pay, the company paid only statutory sick pay in an attempt to persuade him to engage with the disciplinary process.  When the claimant resigned and raised a constructive dismissal claim, the tribunal found the failure to pay contractual sick pay was a breach of contract. However, the tribunal held it was not a fundamental breach of contract entitling the claimant to resign and treat himself as being dismissed. By withholding the sick pay the employer was trying to encourage the claimant to participate in the disciplinary process integral to the employment relationship, they were not indicating an intention not to be bound by it. 

The Employment Appeal Tribunal (EAT) upheld the claimant's appeal. The employment tribunal appeared to have adopted an approach whereby they considered that for a breach of contract to be fundamental there must be an intention on the part of the employer not to be bound by the terms of the contract in a manner that meant that the employer no longer wishes to continue with the employment relationship. That approach was an error of law. What is required is an intention no longer to comply with the terms of the contract that is so serious that it goes to the root of the contract. In this case, there was a deliberate decision not to pay full company sick pay to which the employee was entitled, in circumstances where there were other contractual provisions which the employer could have relied upon if it thought the claimant was not genuinely unwell. The reduction in earnings was substantial and, as far as the EAT were concerned, was clearly a fundamental breach of contract. 

It seems that in this case the employer decided that the illness was not genuine and saw withholding contractual sick pay as a way to pressurise the employee into engaging in the disciplinary process. Rather than using the procedures available to them to investigate their suspicions they tried to force the hand of the employee and it backfired. Frustration can cause employers to make poorly thought-out decisions. In cases such as this it is important to look before you leap and consider the possible outcomes arising from those decisions before they are taken.


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