THSP symbol

The Implied Term of Trust and Confidence and Constructive Dismissal

Glen London

By Glen London

Is there more to an employment contract than just the written words on the contract? Employers should also be aware of the implied terms of Trust & Confidence, which are terms not expressly written in the contract but are implied by the nature of the employment relationship.

The importance of this concept is that it could be used either by an employee alleging that they have been constructively dismissed (they felt the relationship with their employer was so bad that they had to resign); or an employer seeking a reason for termination of an employee’s contract. Despite its importance, it is not clearly defined in law, but will be considered by the courts relative to the context of the case.

The concept became articulated in the in the case of Woods v WM Car Services Peterborough Limited in the early 1980s, a case involving a Chief Secretary and Accounts Clerk who had the word “Chief” taken out of her job title and whose responsibilities had been changed. The Employment Appeal Tribunal stated that:

It is clearly established that there is implied in a contract of employment a term that employers will not, without reasonable and proper cause, conduct themselves in a manner calculated or likely to destroy or seriously damage the relationship of confidence or trust between employer and employee”.

Looking at this definition, it should be noted that the courts would consider if the alleged breaching party had “reasonable and proper cause” for its conduct. Furthermore, it should be noted that it does not matter whether the breaching party intended to destroy or seriously damage the relationship of trust and confidence.

Some possible examples of the breakdown of the implied terms of Trust & Confidence by an employer could be:

  • Not allowing a statutory right, such as having a work colleague at a disciplinary meeting.
  • Unjustified/continual criticism of the employee over a period of time
  • Reduction in salary, without agreement
  • the employer suggesting an “exit package” to an employee as an alternative to the formal disciplinary procedure (without going through a Without Prejudice process)
  • Failure to investigate an employee’s complaints or grievances
  • Reprimanding a employee in front of other employees
  • Unreasonable and unjustified workplace monitoring of employees
  • Failure to follow company standards and procedures.
  • Deceiving an employee
  • Forcing an employee to complete excessive workloads.
  • Undermining an employee’s authority in crucial areas
  • Falsely accusing an employee of theft without the grounds to do so
  • Giving unjustified or excessive warnings to an employee to dishearten them or force them from employment.
  • Being responsible for psychiatric injury to an employee

Can an employee break the implied terms of Trust and Confidence?

Indeed they can, and in many dismissals there is always an element of the breakdown of Trust & Confidence. However, the courts are conscious that employers apply this rationale to terminate employment all to readily. In the case of McFarlane v Relate Avon Limited the court stated:

in almost any case where an employee has acted in such a way that the employer is entitled to dismiss him the employer will have lost trust and confidence in the employee… it is more helpful to focus on the specific conduct rather than resort to general language of this kind.”

Therefore, as an employer, the focus of any possible dismissal should be on the action of the employee that is a specific breach, such as stealing, aggressive behaviour; breach of confidentiality etc, than the broader term of the Breakdown of Trust and Confidence.

Similarly, employees must demonstrate that a significant and fundamental breach of the implied terms to be able to argue that they have been ‘constructively dismissed’. For an employee to claim that conduct which is mildly or moderately objectionable will not suffice as the reason for a claim of a breakdown of trust and confidence.

It should also be noted that an employee must have 2 years’ continuous employment to make a claim against their employer for constructive dismissal.

When claiming constructive dismissal, the employee is in essence stating that the employment contract has been breached to such an extent that they can no longer work under the conditions they perceive have broken the contract. The courts would consider if the employee resigned at the time, or near the time of the breach.  An employee who continues to work after the date of the breach is in most cases indicating that the breach was not significant at the time and subsequently claiming breach of contract in retrospect, when it suits them, weakens their arguments in court.

The exception to the above is the principle of “the last straw”. In this scenario, it is possible to base a constructive dismissal claim on a series of minor breaches if the latest one is the last straw for the employee and results in their resignation. The question is whether the cumulative series of acts taken together amount to a breach of the implied term of trust and confidence.

In Kaur v Leeds Teaching Hospital NHS Trust, the Court of Appeal reviewed the “last straw” doctrine. The Court stated in this case that the final act in a series of breaches of contract does not have to be of the same nature as any earlier breaches, but it must be capable of contributing something to the series of earlier breaches. The Court also stated that an employee will not be prevented from succeeding in a claim for constructive dismissal based on a series of breaches where they have previously affirmed the contract (by continuing to work despite their employer’s breaches of contract) but then resigns after a further “last straw act”. If, however, there is no “last straw act”, the employee will not be able to rely on the employer’s earlier breaches of contract to find a claim for constructive dismissal.

One final consideration that courts will have is if the employee lodged a formal grievance against their employer before resigning. The reason for this is that it gives the employer an opportunity to resolve the dispute. The failure to lodge a grievance before resigning means an employment tribunal can reduce any damages awarded against the employer by up to 25%.

In summary, for a claim by an employee to succeed the employee must show that their employer has fundamentally acted in a way that makes their position has become untenable. The onus will be on the employee to demonstrate that a fundamental breach took place.