The final straw in cases of constructive dismissal

By Hong Tran, Registered foreign lawyer, Employment and Employee Benefits Group Johnson Stokes & Mas

Article exclusively contributed by Johnson Stokes & Master

Under the Employment Ordinance, there are certain circumstances in which an employee may terminate the contract of employment without notice or payment of an equivalent amount of wages in lieu. When specific conditions apply, he or she is said to be "constructively dismissed", and the relevant guidelines are as follows:

(i) if the employee reasonably fears physical danger by violence or disease, such as was not contemplated by the contract of employment expressly or by necessary implication;
(ii) if the employee is subjected to ill-treatment by an employer;
(iii) on any other ground on which the employee would be entitled to terminate the contract of employment without notice at common law.

The test for determining constructive dismissal at common law is considered in two parts. The first is whether the employer has breached an express or implied contract term, or demonstrated an intention not to be bound by those terms. The second is whether the breach is sufficiently serious to entitle the employee to leave without notice. Common examples of constructive dismissal include an employer providing insufficient notice, a unilateral decision to change an employee's work schedule or job duties, demotion, and failure to pay wages on time.

The breach by the employer may be a single act or consist of an accumulation of actions. In the recent case of Omilaju v Waltham Forest London Borough Council, the UK Court of Appeal provided some useful guidance on how to determine what kind of action amounts to a "final straw", where a series of alleged acts have given rise to a claim of constructive dismissal.

Mr Omilaju was an employee of the Council. In the previous two and a half years, he had instigated five sets of proceedings against the Council before the Employment Tribunal. All of those claims were dismissed. The Council had refused to pay Mr Omilaju's full salary during July and August 2004 when he was absent from work without leave attending the Tribunal hearings. He resigned on 7 September 2004, saying that the Council's refusal to pay his salary was "the last straw in a series of less favourable treatment that [he] had been subjected to over a period of years".

Mr Omilaju then began further proceedings against the Council. The Tribunal dismissed six of his complaints, including a claim that he had been constructively dismissed. After various counter-appeals, the case eventually came before the Court of Appeal. As they saw it, the main issue was to decide on the necessary quality of a final straw if it was to be successfully relied upon by the employee as a repudiation of the contract.

It is an implied term of any contract of employment that the employer shall not, without reasonable or proper cause, act in a manner likely to destroy or damage the relationship of confidence and trust with the employee. Any breach of this implied term amounts to a repudiation of the contract of employment.

The Court said that the act amounting to the "last straw" did not have to be of the same type as those which had taken place previously. Its essential quality should be that, when taken in conjunction with earlier acts on which the employee relied, it would amount to a breach of the implied term of trust and confidence.

There is no need to characterise the final straw as "unreasonable" or "blameworthy" conduct, although it will usually be possible to do so. Nevertheless, it must contribute, however slightly, to the breach of the implied term.

In Mr Omilaju's case, the Council had in place at the relevant time a rule that said employees taking proceedings against it were required to apply for special unpaid or annual leave to attend a hearing. Mr Omilaju had not applied for such leave. The Tribunal had originally found that he resigned because he was not paid. It also found that "looked at objectively, the straw that broke this camel's back was perfectly reasonable and justifiable conduct of his employer acting fully in accordance with the terms of [Mr Omilaju's] contract and the terms incorporated in it". Therefore, he had not been constructively dismissed.

The Court of Appeal agreed with the Tribunal's views and said that it would be an unusual case where conduct, which is "perfectly reasonable and justifiable", satisfies the final straw test.

Q & A on constructive dismissal
Q1 What other circumstances would amount to constructive dismissal?
A1 The unreasonable or "capricious" exercise of an employer's discretion not to pay a discretionary bonus has been held to be in breach of the implied term of trust and confidence. Therefore, this could be grounds for the employee to claim constructive dismissal.

Q2 Will an employee still be eligible to receive statutory severance pay or long service pay, or be entitled to bring a claim for unreasonable dismissal if constructively dismissed?
A2 Yes. Provided the other qualifying criteria are satisfied. Even though, in practice, the employee resigns, the Employment Ordinance deems such a resignation to be a "dismissal".

Taken from Career Times 18 March 2005

(Last review date: 23 August 2013)

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