What is constructive dismissal?

Constructive dismissal is basically the situation where an employer has committed a serious breach of contract entitling the employee to resign in response to the employer’s conduct, by treating himself as having been dismissed by the employer.^[1] In such cases, the existing legal framework enables the treatment of the employee’s resignation as a form of unfair dismissal since the actions and/or conduct of the employer (constructive part) leads to the resignation of the employee (dismissal part).^[2]

In the British case Western Excavating (ECC) Ltd v Sharp^[3], it was stated that “If the employer is guilty of conduct which is a significant breach going to the root of the contract of employment, or which shows that the employer no longer intends to be bound by one or more of the essential terms of the contract, then the employee is entitled to treat himself as discharged from any further performance”. If he does so and proceed with the termination of the employment contract by reason of the employer’s conduct, he is constructively dismissed.

The aforementioned legal approach is also reflected in the relevant applicable Cypriot law. More specifically, subsection 7(1) of the Termination of Employment Law of 1967 (24/1967) (the “Law”) provides that in cases where an employee legally terminates his/her employment with the employer due to the conduct of the employer, then such termination is considered as being termination of employment by the employer within the meaning of section 3 of the Law, which recognises the employee’s right to receive compensation after his/her termination of employment by the employer.

However, it must be stressed that according to subsection 7(2) of the Law, in any proceedings before the Labour Disputes Tribunal initiated pursuant to the abovementioned subsection 7(1) of the Law, it will be presumed, until proven otherwise, that the employee has not terminated his employment lawfully. This actually means that the burden of proof is on the employee to show at the Court that the conduct and/or actions of the employer amounted to a fundamental and/or serious breach of contract (usually referred to as a “repudiatory breach”) leading the employee to terminate the employment contract as a result.

What is a repudiatory breach?    

In cases of constructive dismissal, the employer’s unreasonable conduct and behaviour leading an employee to terminate the employment contract is often referred to as a “repudiatory breach”. A repudiatory breach can either be a fundamental breach of an express contractual term or a breach of the implied term of “trust and confidence” between the parties.

It must also be noted that such unreasonable treatment by the employer may either be a one-off serious breach of the employment contract (for instance, failure by an employer to pay an employee’s salary) or a continuous pattern of behaviour and/or incidents, which taken as a whole amount to a fundamental breach of the implied term of trust and confidence (for instance, persistent bullying in the workplace).

In Lewis v Motorworld Garages Ltd^[4] it was stated that “..the repudiatory conduct may consist of a series of acts or incidents, some of them perhaps quite trivial, which cumulative amount to a repudiatory breach of the implied term of the employment contract that the employer will not, without reasonable and proper cause, conduct himself in a manner calculated or likely to destroy or seriously damage the relationship of confidence between the employer and the employee”.  

In general terms, a finding that there has been conduct which amounts to a breach of the implied term of trust and confidence will inevitably mean that there has been a fundamental or repudiatory breach going necessarily to the root of contract.^[5] In Garner v Grange Furnishing Ltd,^[6] it was stated that behaviour or conduct amounting to a repudiation can be a series of small incidents over a period of time. If the employer is making it impossible for the employee to go on working, that is plainly a repudiation of the employment contract.^[7]

In the Cypriot case Louis Tourist Agency Ltd v Antigonis Elia,^[8] it was stated that the kind of an employer’s conduct and/or behaviour justifying the termination of employment by the employee is not specified in the aforementioned subsection 7(1) of the Law. However, in the aforementioned case, reference was also made to Alouet Clothing v Athanasiou,^[9] where it was held that a breach of a fundamental term of the employment contract by the employer, constitutes a conduct falling under the provisions of subsection 7(1) of the Law. Moreover, it was stated that although it is difficult, if not impossible, to exhaustively determine the employer’s misconduct falling under subsection 7(1) of the Law, such conduct must be of such nature and character as to undermine the foundation of the employer-employee relationship, whether by breach of a fundamental term of the employment contract or by conduct and/or behaviour on the part of the employer which is not compatible with the admissible relationship framework between the employer and the employee.

What is the applicable standard of assessment for a breach to be considered as a repudiatory breach of the employment contract giving rise to a claim for contrastive dismissal? Is this standard objective or subjective?

It shall be noted at this point that in order for a breach of the implied term of trust and confidence to exist, it is not necessary to be proved that the employer intended the repudiation of the contract. The function of the employment tribunal is to examine the employer’s conduct as a whole and to determine whether it is such that its cumulative effect judged reasonably and sensibly is such, that the employee cannot be expected to put up with it.^[10] Whether an employee is entitled to terminate his/her employment contract by reason of the employer’s behaviour does not depend upon whether the employer had intended the conduct to be repudiatory or could reasonably have believed that it would be accepted as such, but upon whether the employer’s conduct, viewed objectively, manifests an intention no longer to be bound by the contract.^[11] In other words, the employer’s behaviour must be such that its effect, judged reasonably, is to disable the other party from performing properly his/her duties and obligations.^[12] It is thus inferred that the applicable standard in such cases is objective and not subjective; it is that of a reasonable person. This is also reflected in Malik v BCCI,^[13] where it was stated that the conduct of the employer must impinge on the relationship between the employer and the employee, in the sense that, looked at objectively, it is likely to destroy or seriously damage the degree of trust and confidence the employee is reasonably entitled to have in his employer. This requires one to look at all the relevant circumstances.

Whether the conduct of the employer constitutes behaviour that justifies the resignation on the part of the employee, is judged by examining and assessing objectively the facts and circumstances of each individual case.

The subjective sensitivities of an employee are not taken into consideration for the purposes of such assessment.^[14]

What kind of an employer’s behaviour and/or conduct may constitute a repudiatory breach for constructive dismissal purposes?      

According to Halsbury’s Laws of England^[15], although there is no exhaustive list of behaviours and/or incidences that may give rise to a claim for constructive dismissal, it was noted that among the types of breach of contract by the employer that may support a finding of constructive dismissal are the following:

a)       A failure to pay wages or unilateral decision to cut pay;

b)      Demotion or other change in status;

c)       A change of job content not permitted or envisaged by the contract;

d)      Undermining a senior employee’s position;

e)      Change of the place of work, or breach of a mobility clause, whether express or implied;

f)        Unilateral change of working hours;

g)       Failure to ensure the employee’s safety;

h)      Breach of the term of trust and respect;

i)        Failure to follow a contractually binding disciplinary procedure;

j)        Imposition of a disciplinary measure in a disproportionate manner;

k)       Failure to provide a reasonably suitable working environment

l)        Failure to deal with grievances properly and timeously.^[16]

An offensive and derogatory behaviour towards an employee may constitute a repudiatory breach giving rise to claims for constructive dismissal. In Palmanor Ltd v Cedron^[17], it was stated that although tribunals have to be careful so as to avoid attaching great importance to words used in the heat of the moment or in anger, there comes a time when the language is such that even if the person using it is in a state of anger, an employee cannot be expected to tolerate it.

Moreover, failure of an employer to adequately support the employees in periods with increased workload may also constitute a behaviour amounting to a repudiatory breach for constructive dismissal purposes. In Seligman & Latz Ltd v Mc Hugh,^[18] the Employment Appeal Tribunal held that the employee was entitled to regard herself as having been constructively dismissed on grounds that the employers were in breach of an implied condition in her employment contract that if she were overloaded, she would have the assistance of a junior and/or apprentice hairdresser and that the breach was fundamental going to the root of the contract.

What role does the time of resignation play in cases of claims for constructive dismissal? What is the right time for an employee to tender his/her resignation in such cases?

The answer to the above question is that the timing of an employee’s resignation plays a crucial role in the outcome of a claim for constructive dismissal. In Western Excavating (ECC) Ltd v Sharp,^[19] it was stated that the employee “must make up his/her mind soon after the conduct of which he/she complains”. This is due to the fact that if the employee leaves a long period of time to lapse between the occurrence of the repudiatory breach and the time of his resignation as a result of such breach, he is quite likely to lose the right to claim that he has been constructively dismissed by the employer as he may be taken to have affirmed the employment contract and waive the repudiatory breach thereof.

In W.E. Cox Toner (International) Ltd v Crook,^[20] it was noted that an employee faced with a repudiation by his employer is in a very difficult position in the sense that if he goes to work the following day, we will himself be doing an act which is consistent with the continued existence of the contract, and he might be said to be affirming the contract. Moreover, if he then accepts his (monthly) salary (i.e. further performance by the guilty party), the risk of being held to affirm the employment contract is even greater. It was further noted that “delay might be serious, not in its own right but because any delay normally involves further performance of the contract by both parties. It is not the delay which may be fatal but what happens during this period of delay”.^[21] Mere delay, unaccompanied by any express or implied affirmation of the employment contract, does not constitute affirmation thereof, but if it is prolonged it may be evidence of an implied affirmation.^[22]

However, it must be noted at this point that if the innocent party further performs the contract to a limited extent but at the same time makes it clear that he/she is reserving his/her rights to accept the repudiation or is only continuing so as to allow the guilty party to remedy the breach, such further performance does not prejudice his right subsequently to accept the repudiation.^[23]

Moreover, in Marriot v Oxford Co-operative Society^[24] it was noted that provided that the employee makes clear his/her objection to what is being done, he/she is not to be taken to have affirmed the contract by continuing to work and be paid for a limited period of time (i.e. continue working under protest for a limited time period), even if his/her purpose is merely to enable him to find another job.

In Waltons and Mors v Dorrington^[25] it was further noted that there is no fixed time limit in which the employee must make up his mind. It depends upon all the circumstances including the employee’s length of service, the nature of the breach and whether the employee has protested at the change. It was also stated that “mere protest will not however, prevent an interference that the employee has waived the breach, although exceptionally, a clear reservation of rights might do so”.

In the Cypriot case Κώστας Mηνά v Κυπριακές Αερογραμμές Δημόσια Λτδ,^[26] the Court held that, although a not so short time period of 3⅟2 – 4 months, has lapsed from the date the breach has occurred (i.e. the unilateral change of the terms of the employment contract by the employer company), the employee had not waived the breach and/or affirmed the employment contract and concluded that the employee had been constructively dismissed. In its abovementioned decision the Employment Tribunal had taken into consideration the employee’s overall attitude during the aforesaid period of 3⅟2 – 4 months, the length of the employee’s employment with the employer company (i.e. twenty-three years), and the fact that the employee was faced with the objective difficulty in finding a job of a similar nature in Cyprus.

Is the employee’s right to a constructive dismissal claim lost permanently in cases of lapse of time?

In the latest leading case Kaur v Leeds Teaching Hospitals NHS Trust,^[27] the Court of Appeal confirmed that in cases where there has been an earlier repudiatory breach which has been affirmed by the employee, if there is subsequently conduct which taken together with the employer’s earlier fundamental breach that causes the employee to resign or plays a part in the decision of the employee to resign, the later act (which may not be itself repudiatory) effectively reactivates the earlier repudiatory breach. The employer’s further act can be described as “reviving” the employee’s right to terminate the contract. An employee who is the victim of a continuing cumulative breach, is entitled to rely on the totality of the employer’s acts notwithstanding a prior affirmation, provided the later act forms part of the series.

It was also noted that “when the threshold had been reached would of course be a matter of assessment in every case, and no one would know whether the employee had jumped either too early or too late until a tribunal ruled”.

In its judgment, the court stated that there is a five-question test for tribunals to consider when determining whether an act and/or an incident may be deemed to be a last straw, enabling an employee to claim that he/she has been constructively dismissed by his/her employer:

1. What was the most recent act (or omission) on the part of the employer which the employee says caused, or triggered, the resignation?
2. Has the employee done anything to suggest that they have accepted (or affirmed) the contract since that act?
3. If not, was that act (or omission) by itself a repudiatory breach of contract (i.e. of sufficient importance to justify resignation)?
4. If not, was it nevertheless a part of a course of conduct comprising several acts and omissions which, viewed cumulatively, amounted to a repudiatory breach of the employee’s contract by showing that all trust and confidence had been destroyed? If it was, there is no need for any separate consideration of a possible previous affirmation.
5. Did the employee resign in response (or partly in response) to that breach?

All that is required for a last straw resignation is that a series of incidents, whether or not previously affirmed, amounts to a fundamental breach of contract. In other words, further contributory acts effectively revive the employee’s right to rely upon the whole series of acts, notwithstanding the earlier affirmation(s). If the employee does not delay his/her resignation from the occurrence of the last of these incidents, his/her constructive dismissal claim may be well-founded.

In Kaur v Leeds Teaching Hospitals NHS Trust,^[28] the claimant was employed by the NHS Trust Hospitals, the Tribunal held that the entirety of the disciplinary and appeal process conducted by the employer and their outcomes were arguably reasonable and that it was not open to the claimant to wait fifteen (15) months after the incident in 2013 to rely on the appeal outcome in 2014 as the last straw entitling her to resign claiming that she has been constructively dismissed.

Is causality between the employer’s conduct and the employee’s resignation a requisite in order for an employee to be able to claim that he/she has been constructively dismissed by the employer? Does the employer’s repudiatory conduct have to be the sole cause of resignation?

Causality between the employer’s conduct and the employee’s resignation is a prerequisite in cases of constructive dismissal.

In Walker v Josiah Wedgwood & Sons Ltd,^[29] it was noted that it is at least a requisite that the employee should resign as a result of the breach of the employer’s relevant duty to him/her, and that this shall demonstrably be the case. Moreover, it was further stated that it is not sufficient if the employee resigns in circumstances which indicate some ground for his/her resignation other than the breach of the employer’s obligation to him/her. The test is whether the employee’s resignation was effectively caused by the employer’s repudiation.^[30] It is not necessary that the repudiatory breach by the employer is the sole cause of the employee’s resignation, it suffices that this is the substantive cause of the resignation.

In Jones v F Sirl & Son (Furnishers) Ltd,^[31]the employee was faced with worsened employment terms and conditions and waited three and a half weeks until she was approached by another firm that offered her a job prior to her resignation. The employee accepted the job offer and claimed that she had been constructively dismissed by the employer. The employment tribunal concluded that the resignation was in response to the job offer and not to the employer’s repudiation. The Employment Appeal Tribunal (EAT) overturned the decision of the employment tribunal and held that the employee had been constructively dismissed as a result of the repudiation of the employment contract on the part of the employer. It was also stated that the test was not what was the sole cause of resignation but rather what in fact was the effective cause.

Who bears the burden of proof in constructive dismissals claims?

The burden of proof in cases of claims for constructive dismissal is on the employee. This actually means that the employee has to show at the Court that the repudiatory conduct and/or actions of the employer left the employee with no other option than to terminate the employment contract and tender his/her resignation as a result.

As already mentioned, according to subsection 7(2) of the Law, in any proceedings before the Labour Disputes Tribunal relating to claims for constructive dismissal (pursuant to subsection 7(1) of the Law), it will be presumed, that the employee has not terminated his employment lawfully until proven otherwise by the employee.

What are the employees’ rights to damages/compensation in constructive dismissal cases?

According to subsection 7(1) of the Law, in cases of constructive dismissal, the employee is entitled to     receive damages/compensation pursuant to section 3 and Tables A and D of the Law as per below:

It is noted that paragraph 4 of Table A of the Law states that, the Employment Tribunal, has absolute discretion as to the determination of the compensation amount awarded to an employee. It is also noted that, except to what is provided above, in the determination of the compensation amount the Employment Tribunal will also take into consideration, inter alia, the following: i) the wages and any other earnings of the employee; ii) the period/duration of employment of the employee; iii) the loss of prospect of the employee in finding another job; iv) the age of the subject matter employee; v) the actual conditions of the employee’s employment termination.