Giving false reason for dismissal was breach of the implied term of mutual trust and confidence

Employment tribunal was wrong to reject the wrongful constructive dismissal claim

In Rawlinson v Brightside Group Ltd, the EAT has held that an employment tribunal was wrong to reject the wrongful constructive dismissal claim of an employee who resigned when falsely told that he was to be dismissed due to a work reorganisation (the real reason was his performance). The tribunal erred both in its failure to find that the employer had acted in breach of the implied term of trust and confidence and in its characterisation of the employee’s complaint as relating to the manner of his dismissal. By deciding to give him a reason for the termination of his employment, the employer had assumed an obligation not to mislead, an obligation it then breached. The complaint did not relate to the dismissal but to the falsehood told with a view to keeping the relationship alive for the notice period.

R was employed as an in-house legal counsel by BG Ltd, a firm of insurance brokers. A few months into his employment, the company decided to dismiss R due to concerns about his performance, despite never having raised these with him. To ‘soften the blow’, R was simply told that BG Ltd had decided to outsource legal services. It wanted him to work through his three-month notice period to ensure a smooth handover of work. However, R resigned with immediate effect on the basis that that any outsourcing exercise would constitute a ‘relevant transfer’ under TUPE and the company was therefore breaching its statutory obligations. R subsequently brought employment tribunal claims for, among other things, breach of the duty to inform and consult under TUPE and wrongful constructive dismissal (based upon a fundamental breach of the implied term of trust and confidence).

The tribunal rejected R’s TUPE claims, finding that there was no relevant transfer. As for the contract-based claim, the tribunal found that the company’s failure to forewarn R of any performance concerns and the potential for dismissal did not amount to a breach of the implied term of trust and confidence. Although R genuinely, and with some cause, believed that he was unfairly treated, BG Ltd had no obligation to provide the information to him. The tribunal considered that R’s complaint was really about the manner of his dismissal. This meant that it would be precluded by the House of Lords’ decision in Johnson v Unisys Ltd 2001 ICR 480, where it was held that common law damages for breach of contract cannot be awarded in respect of unfair treatment connected to a dismissal. R appealed.

The EAT agreed with R that in all but the most unusual cases, the implied term of trust and confidence must import an obligation not to deliberately mislead. This does not mean an employer is necessarily placed under some broader obligation to volunteer information, such as a reason for dismissal. Nevertheless, where a choice has been made to do so, the implied term requires that it is done in good faith. Even allowing that there may be particular cases in which the operation of the implied term would permit some element of deceit – the ‘white lie that serves some more benign purpose’ – the EAT could not see how that was so here. The tribunal had therefore erred in failing to find that the implied term had been breached.

The tribunal had further erred in failing to see that R’s complaint did not relate to the dismissal, but to the falsehood told to him with a view to keeping the relationship alive for the notice period. It therefore did not fall within the ‘Johnson exclusion zone’. As the House of Lords recognised in Eastwood and anor v Magnox Electric plc (Brief 762), if an employee suffers loss as a result of an employer’s breach of the implied term in the steps leading to a dismissal, he or she has a common law cause of action that precedes, and is independent of, the subsequent termination of employment. R’s response to the communication of an untrue reason for his dismissal was to walk out, giving rise to a loss of earnings over the notice period. The EAT therefore allowed the appeal and substituted a finding that R’s wrongful dismissal claim should succeed.

Link to transcript: http://www.bailii.org/uk/cases/UKEAT/2017/0142_17_2111.html