The Employment Appeal Tribunal (EAT) has held in Upton-Hansen Architects Ltd v Gyftaki that, when faced with a claim for constructive dismissal, employers cannot just issue a generic denial of the claim. Instead, as the onus is on them to identify the reason for dismissal, they must make clear the potentially fair reason that they relied on for dismissing the person.
In July 2017, Ms Gyftaki retrospectively applied for – and was granted - additional leave to cover a planned holiday with her family in Greece. Two months later, she had to travel again to Greece at short notice.
As she had exhausted her holiday entitlement by that stage, she emailed her manager on the morning of 27 September asking to take unauthorised leave, starting the next day. After an exchange of emails during the day, he emailed her at 8.30pm refusing permission. She replied that she could not postpone and would take the time as unpaid leave.
When she returned to work, the company decided that it had to respond to what it perceived to be Ms Gyftaki’s refusal to obey a reasonable management instruction. It therefore suspended her on full pay pending an investigation into the alleged misconduct. It was felt that suspension was necessary because of her seniority and the fact that she was leading three sensitive projects. It also said it was to protect her from embarrassment in case she behaved inappropriately at work.
Two days before a disciplinary hearing was due to take place she resigned, claiming constructive unfair dismissal and wrongful dismissal on the basis that her employer had breached the implied term of trust and confidence.
The tribunal agreed that the decision to suspend her was a breach of the implied term as there was no evidence that the company needed to protect the confidentiality of the projects in which Ms Gyftaki was involved, nor the integrity of the investigation. It also held that including allegations about her leave of absence in July as part of the October disciplinary matters was not justified.
The company appealed arguing (among other things) that the tribunal had conflated the tests in sections 98(1) and 98(4) of the Employment Rights Act 1996. Section 98(1) requires a tribunal to address the reason for dismissal; while section 98(4) requires it to consider whether it was within the band of reasonable responses open to an employer to dismiss the employee.
The EAT held that the tribunal had been entitled to find that there was no fair reason for dismissal, not least because the company had not offered a reason for dismissing her but instead had simply denied all her claims.
As the onus was on the employer to identity the reason under section 98(1), their generic denial meant that it was not possible to identify what their case might be if it was decided that Ms Gyftaki had been constructively dismissed.
Although the company had a specific section in their defence entitled “constructive dismissal” which disputed the claim that it had fundamentally breached Ms Gyftaki’s contract, it did not deal with the ramifications of a finding of dismissal. In other words, it had not offered a potentially fair reason for dismissal in those circumstances.
The tribunal had not therefore conflated the section 98(1) ERA 1996 test and the section 98(4) test and had not erred by not considering section 98(4). There being no fair reason for dismissal, the tribunal rightly concluded that the dismissal was unfair, and section 98(4) did not need to be considered.
This case is a useful reminder that there is more to a constructive unfair dismissal claim that just proving that there was a fundamental breach of contract. If such a finding is made the tribunal will next go on to consider whether there was a potentially fair reason for the conduct resulting in the constructive dismissal of the employee. This is for the employer to establish and this case is authority that an employer cannot just provide a bare denial and then look to establish a potentially fair reason later. It must set out its case from the start.