Employees who have affirmed a breach of contact can resign and claim constructive dismissal if there is a subsequent breach. In Brown and anor v Neon Management Services Ltd and anor, the High Court held that employees who were working out their notice could still claim constructive dismissal after their employer committed further breaches during the notice period.
Three employees - Mr Brown, Ms Bhoma, and Ms O’Reilly - who were employed as a team in the insurance sector, complained that the company had fundamentally breached their contracts of employment and all resigned with notice on 16 March 2018. In Mr Brown’s case this meant his employment would not come to an end until 12 months later on 15 March 2019, while Ms Broma and Ms O’Reilly’s notice expired six months later on 15 September 2018.
Whilst serving their notice the company committed further repudiatory breaches of contract by withholding pay increases, subjecting the employees to unjustified disciplinary proceedings and reporting them to the regulator. Mr Brown and Ms Bhoma resigned with immediate effect on 1 May 2018, while Ms O’Reilly continued to serve her notice period.
Mr Brown and Ms Bhoma brought claims for a declaration for breach of contract and damages for wrongful dismissal. Ms O’Reilly brought a claim for breach of contract
Affirmation of contract
In the landmark decision by the Court of Appeal in 1978 of Western Excavating v Sharp, it was held that, in the face of a repudiatory breach of contract, the employee must not delay too long before resigning otherwise they will be taken to have affirmed their contract.
Decision of High Court
Relying on the decision in Western Excavating, the High Court held that as the employees indicated that they would be working their notice periods which were lengthy it would be “unconscionable” to keep the repudiation of contract alive for that length of time in the absence of any further breaches of contract.
However, in this case, the company committed further repudiatory breaches and as Mr Brown and Ms Bhoma had resigned promptly in relation to the more recent breaches they were wrongfully dismissed. Furthermore, they were no longer bound by the post termination restraints clauses.
The High Court held that they entitled to recover damages in respect of pay, bonuses as well as the appropriate share of profit commission that they should have received.
This case follows another recent case of Kaur v Leeds Teaching Hospital (weekly LELR 579) which held that an employee who is the victim of an ongoing breach can rely on the totality of the employer’s acts notwithstanding a prior affirmation. Although employees should be aware that they may be held to have affirmed their contract if they resign with notice, it is worth noting that if their employer commits further breaches, they may still be entitled to resign and claim constructive dismissal.