Employment Tribunal finds that claimant was constructively dismissed after being unfairly accused of dishonesty (Mr M Sturgess v MHM (UK) Limited)

In the case of Mr M Sturgess v MHM (UK) Limited ET/ 2600113/2017 the Employment Tribunal found that the Claimant had been unfairly dismissed as a result of resigning from his job (constructive dismissal) because the Respondent’s behaviour amounted to a repudiatory breach of the employment contract and had been wrongfully dismissed as he was owed notice pay. The Claimant was not able to claim failure by the Respondent to pay sick pay as an unlawful deduction of wages but he was successful in being paid a bonus for 2016.

The facts in Mr M Sturgess v MHM (UK) Limited

The Claimant began working for the Respondent as a “hands on” engineer on or about 5 January 2005. The Respondent was an engineering company, manufacturing recycling equipment. The Claimant’s career with the Respondent was successful and he was promoted to Workshop Manager in 2006 and became a director of the company in 2010. However, as a director, the Claimant did not seem to have the same status as the two owners and other directors of the company, Mr and Mrs Hall, in that he never attended board meetings nor was consulted on strategic decisions that the company was to take.

In 2012, Mr and Mrs Hall asked if he would be happy to be paid part salary and dividends as his remuneration. The Claimant agreed but did not enquire further as to his shareholding and never received a share certificate. In the same year, the Claimant was given a new van that he was allowed to use for professional and personal purposes (with his family); he was also allowed when the workshop was quiet to make items (and was allowed by Mr Hall to make a steel gate for his house at no charge). He was the only employee given a company credit card and he submitted all his expenses to the Halls. The Claimant was never subject to any disciplinary measures.

All correspondence between the Claimant and the Respondent was oral. The Claimant never received a written contract of employment with written terms. None of the hourly paid employees received sick pay nor did the Claimant after becoming a salaried employee in 2006; nor did Mr or Mrs Hall (the only other salaried employees). In the summer of 2016, the Respondent managed to secure an exclusive distribution deal with a company called Jovisa and at that time, farmed out all its employment matters to another company called, Peninsula.

The Respondent decided as part of a set of changes, to put a tracker on the Claimant’s van, which the latter objected to but had to accept. Mr and Mrs Hall left on holiday and while they were away, the Claimant made the steel gate he had agreed with Mr Hall that he would and began on a horse trailer whose expenses he bore, planning on telling Mr Hall about it when he returned. When the Halls returned, the Claimant was due to go on his holiday and with no notice, for the first time in 4 years, Mr Hall told the Claimant that he could not take the van with him. When the Claimant asked why, Mr Hall replied, “Just do it”. In the meantime, Mr Hall began to question two expenses that the Claimant had as they related to times when he did not have the van with him, suggesting that they were not work related.

While the Claimant was on holiday, he did as he normally did and kept his work mobile phone on and had the intention of checking his work email. However, when he did try to do both, he found he had been disconnected. On return to work on 24 August 2016, he found a letter from Mr Hall calling him for an investigation relating to the use of the van for personal use during working hours, the use of the credit card for personal use and the use of the workshop and materials for personal use. The Claimant also found that his credit card had been cancelled. The Respondent’s behaviour suggested that the Claimant was dishonest and caused him so much stress that he became ill and went off sick on 30 August 2016.

The Claimant hired a solicitor who over the course of the next two months requested that Mr Hall provide explanation as to why the Claimant was not receiving contractual (but only statutory) sick pay and also more detail on the allegations made. Mr Hall refused this information explaining in a letter on 5 October that the investigation meeting had been set up for this very purpose: to gather details. On 7 October, the Claimant had had enough and felt that the Respondent was trying to get rid of him. He resigned stating in a letter that the Respondent had breached the implied term of trust and confidence (in cancelling his credit card, cutting off access to his email and work mobile and failing to provide details of allegations against him).

The Claimant could not support his family on SSP and so he found another job on 22 October. He then brought a claim of unfair (constructive) dismissal and wrongful dismissal as well as unlawful deduction of wages against the Respondent.

The decision of the Employment Tribunal

Unlawful deduction of wages

The Employment Tribunal considered section 13 ERA 1996 and whether the Claimant should have been provided contractual sick pay. While the Claimant was sent written terms and conditions of his employment after he had resigned which did not entitle him to such sick pay, the Tribunal still considered that there had never been a right to such pay. Implied conduct and custom and practice indicated that not even the other salaried workers (Mr and Mrs Hall) were entitled. The Claimant was therefore treated no differently.

Unfair dismissal

The Tribunal summarised the legal test that needs to be employed and met in such cases: Section 94(1) ERA 1996 which provides that an employee has the right not to be unfairly dismissed.

To succeed in an unfair dismissal claim, an employee must show first of all that he has been dismissed. Section 95 ERA 1996 sets out the statutory definition of dismissal. In particular section 95(1)(c) provides that an employee is regarded as dismissed by his employer if he terminates his employment contract (with or without notice) in circumstances in which he is entitled to terminate it without notice by reason of the employer’s conduct. This is known as “constructive dismissal”.

The Tribunal considered the line of cases decided and that indicated that the Claimant had to show that the Respondent’s breach of the employment contract was so serious that he went to the very heart of the contract, that the Claimant had resigned in response to such fundamental breach and not affirmed the contract in any way by delaying his resignation.

The Claimant relied particularly on the argument in the case of Working Men’s Club and Institute Union Ltd v Balls UKEAT/0119/11 whose facts were similar and in which Mr Balls won his case of constructive dismissal because the instigation of disciplinary proceedings against him were so unreasonable that they were the “last straw” and constituted a breach of the implied term. The Tribunal considered that the Respondent’s behaviour had indeed, in a series events since the Claimant had planned to go on holiday, amounted to behaviour calculated to destroy the Claimant’s trust and confidence. The Tribunal found that the Respondent was unable to give a reasonable and proper explanation for such behaviour and its testimony lacked credibility. In addition, the evidence for allegations against the Claimant appeared to dissolve under cross examination.

The Respondent argued that the Claimant resigned to take up another job. The Tribunal rejected this, stating that the Claimant had had a successful career at the Respondent’s and it was the latter’s behaviour that caused him to resign. His constructive dismissal claim therefore succeeded.

Wrongful Dismissal

The Tribunal found that the Claimant should have been paid 11 weeks’ notice pay.

The Tribunal scheduled a remedy hearing to be held at a later date (unless settlement terms were agreed in the meantime between the parties).

Our solicitors’ view on Mr M Sturgess v MHM (UK) Limited

Caroline Lewis, a specialist employment solicitor at Redmans, commented on the case: “The key to preventing constructive dismissal claims is to avoid the repudiatory breach of contract. This splits into two areas: avoiding the breaches of express terms such as pay, job location, working hours and duties; and avoiding breaches of the implied term of trust and confidence. Employers sometimes need to change employment contracts and T&Cs to ensure the proper operation of the business. This is acceptable under employment law but it’s important to do it properly. Implied term of trust and confidence is usually breached through poor treatment, discrimination or failure to investigate complaints or grievances. Employers that look after their employees and have proper processes in place to prevent workplace discrimination will find these claims easier to resist”.

The decision of the Employment Tribunal in Mr M Sturgess v MHM (UK) Limited can be found here.