Clause and Effect: An Expert Review of Developments in Employment-Related Contract Law

Clause and Effect: An Expert Review of Developments in Employment-Related Contract Law

Aidan O’Neill QC Introductory Remarks

Incorporated Terms: Collective Agreements and Management Policies Thomas Linden QC

Mutual Trust and Confidence Andrew Smith

Topics • Buckland v Bournemouth – Back to Basics? • Distinguishing Malik – Tullett Prebon and the Question of Motive • The ‘Anterior Breach’ Doctrine – A Conflict of Judicial Views • Case Law Round-Up

Buckland v Bournemouth • University professor aggrieved at decision to re-grade his students’ marks • Not satisfied with the internal inquiry • Brought a claim of constructive unfair dismissal

CA upheld ET’s finding of UD • Endorsed EAT’s reasoning in respect of constructive dismissal claims based on alleged breach(es) of the MTC implied term

In determining whether or not R is in fundamental breach of the implied term of MTC, the “unvarnished” Malik test should be applied • If, applying the principles in Western Excavating v Sharp, acceptance of that breach has entitled the E to leave, he has been CD • It is open to R to show that such dismissal was for a potentially fair reason

(4) If step 3 is satisfied, it will be for the ET to decide whether dismissal for that reason, both substantially and procedurally, fell within the range of reasonable responses and was fair Range of reasonable responses test only arises for determination at the final stage of the process

Any problems...? • Formulation of Malik term  defence for R if it can show “reasonable and proper cause” for its conduct • Some assessment of reasonableness at ‘stage 1’ is inevitbale

EAT (Underhill P) in Burton, McEvoy & Webb v Curry [2010] - practical realities • Distinction with / without a difference? • Nagi v Sheffield Black Drugs Service [2010]

Q. Can a repudiatory breach of contract be unilaterally ‘cured’ or remedied? • A. No • But: a “reasonably robust approach to affirmation” is permissible (per Sedley LJ)

Jacob LJ more cautious: it takes “rather a lot” to substantiate a finding of affirmation / waiver • Recognised the “enormous pressure” faced by Es in circumstances such as Mr Buckland’s

Tullett Prebon: R’s Motive • CA emphasised contractual test of repudiation – does the defaulting party evince an “intention to abandon and altogether refuse to perform the contract”? • It is legitimate to take into account motive in certain circumstances

Decision in Malik (per Lord Steyn) distinguished by CA – circumstances of that case were “manifestly different” • Malik was not concerned with the “specific dynamics between employer and employees”

Tullett’s conduct was intended to strengthen, not attack, the relationship of trust and confidence • Tactical deployment of CD claims – close scrutiny of senior Es seeking to avoid notice periods and “irksome covenants”

Duties of trust and confidence may arise prior to the commencement of an employment relationship • E.g. “forward contract” with a prospective employer • Potentially absurd results if not the case

‘Anterior Breach’ Debate • Is Party A, who has committed a repudiatory breach of contract (but which has not been accepted by Party B), barred from terminating the contract by reason of a subsequent repudiatory breach by Party B (which would otherwise entitle Party A to terminate the contract)?

Jack J (Tullett Prebon v BGC and Brandeaux Advisers v Chadwick) vs • Lady Smith (Aberdeen City Council v McNeill)

Case Law Round-Up • Watson v University of Strathclyde [2011] – importance of perceived bias in an internal appeal process • Nixon v Coates [2010] – R’s failure to deal with E’s grievance in a proper fashion

Bedford v Pilgrims Group Ltd [2010] – failure to pay holiday pay was not a fundamental breach of contract • Bailey v Alexander House Agenceis Ltd [2011] - R’s failure to contact E about her grievance (at all), when absent on sick leave, was a breach of MTC

Sawar v SKF (UK) Ltd [2010] – public admonishment of senior E was not a breach of MTC • NB. tricky dividing line between (i) relevant “context” of the alleged repudiatory conduct; and (ii) subsequent attempts to “cure” a fundamental breach

Unilateral Variation Clauses Mathew Purchase

General principles: variations A variation of terms requires consent Ways around this: • Imposition and acquiescence • Dismissal and re-engagement • Unilateral variation clauses

General rules: UVCs Must be express Must be clear and unambiguous The more ‘unreasonable’ the clause, the more clear it must be

Land Securities Trillium v Thornley ‘You will perform to the best of your ability all the duties of the post and any other post you may subsequently hold and any other duties that may reasonably be required of you and will at all times obey reasonable instructions given to you.’

Cadoux v Central Regional Council Terms are ‘supplemented by the Authorities’ Rules as amended from time to time’ ‘Central regional Council has introduced a non-contributory life assurance scheme for all members of staff’

Bateman v Asda Stores ‘The company reserves the right to review, revise, amend or replace the content of this handbook, and introduce new policies from time to time to reflect the changing needs of the business and to comply with new legislation…’

Other arguments Restrictive interpretation? Wandsworth London Borough Council v D’Silva ‘the court is unlikely to favour an interpretation which does more than enable a party to vary contractual provisions with which that party is required to comply’

Implied terms Exercise must be in good faith, and not arbitrary, capricious or irrational Exercise must comply with the implied term of mutual trust and confidence

Sham agreement Autoclenz v Bateman ‘where there is a dispute as to the genuineness of a written term in a contract, the focus of the enquiry must be to discover the actual legal obligations of the parties. To carry out that exercise, the focus will have to examine all the relevant evidence. That will, of course, include their written terms itself, read in the context of the whole agreement. It will also include evidence of how the parties conducted themselves in practice and what their expectations of each other were.’

Requirement to notify the employee (1) Scally v Southern Health and Social Services Board (2) Interfoto Picture Library v Stiletto Visual Programmes ‘If a condition in a set of printed conditions is particularly onerous or unusual, the party seeking to enforce it must show that that particular condition was brought to the attention of the other party’

Contractual Disciplinary Procedures Laura McNair-Wilson

Can a breach of a contractual disciplinary policy lead to career loss damages? • Established orthodoxy was that it could not. • The employee is only entitled to damages for loss of earnings during the period that would have been required for proper completion of the disciplinary procedure plus the notice period. • Gunton v Richmond Upon Thames [1980] ICR 755

Johnson v UnisysLtd. [2001] UKHL 13 Facts: • Mr. Johnson was summarily dismissed for misconduct. • ET found his dismissal unfair because his employer did not comply with its disciplinary procedure. • Mr. Johnson suffered a mental breakdown which impaired his ability to secure alternative employment. • He alleged that the manner of his dismissal was in breach of implied term of trust and confidence and sought damages for the loss he had suffered.

The House of Lords held: • The implied duty of trust and confidence did not extend to dismissal or the manner in which employment was terminated. • Where Parliament has legislated there is no room for the court to invent, as a matter of common law, a further remedy or protection (particularly one which might be more generous than the statutory code).

Eastwood v Magnox Electric Plc; McCabe v Cornwall County Council [2004] IRLR 733 • The House of Lords clarified the ambit of the “Johnson-exclusion zone”; • There is a demarcation between events leading up to dismissal and the dismissal itself; • If, before his dismissal, an employee has acquired a cause of action for breach of contract that cause of action remains unimpaired by a subsequent dismissal and the statutory rights flowing there from.

Botham v The Ministry of Defence [2010] EWHC 646 • The case concerned an employee who was summarily dismissed for gross misconduct, which led to his being placed on a list of persons deemed unsuitable to work with children. Consequently he was unable to obtain alternative employment in his chosen profession. • Following a finding of unfair dismissal the Claimant brought proceedings in the High Court for damages arising from breaches of the contractual disciplinary procedure. • Slade J found that since all the breaches of express terms resulted in dismissal, Mr. Botham’s loss arose out of his dismissal rather than any antecedent breaches. As such it fell within the Johnson-exclusion zone.

Edwards v Chesterfield Royal Hospital NHS Foundation Trust [2010] ICR 921 Facts: • Edwards was a consultant trauma and orthopaedic surgeon who was summarily dismissed for gross misconduct following a disciplinary investigation; • The investigating committee of the GMC later dismissed a complaint against him based on the same allegations. • He was subsequently unable to find work as a consultant and argued that he would be unable to do so because of the findings against him. • Edwards alleged that the disciplinary hearing which had resulted in the findings of misconduct was not conducted in accordance with the terms of his employment contract.

The Court of Appeal held: • The decision in Johnson did not preclude a claim for breach of contract arising out of a disciplinary procedure. • Where an employee could identify a breach of an express term of his contract he was entitled to obtain any remedy available to him under the general law; • It followed that a breach of contract in the form of a failure to comply with an agreed disciplinary procedure was capable of giving rise to a claim in damages; • Nothing in Johnsonor the other authorities suggested that career loss damages are too remote to be recoverable.

The implications of Edwards • The case appears to provide a new and potentially significant remedy to employees who are terminated in breach of contractual procedures, provided they can show that had the procedure been correctly complied with, they would not have been dismissed. • The judgment is not easy to reconcile with earlier authorities, particularly those passages in Johnsonwhich express doubt that breaches of disciplinary rules leading to dismissal are independently actionable. Permission to appeal has been granted by the UKSC.

Mezey v South West London & St. George’s Mental Health NHS Trust [2010] IRLR 512 • The case concerned a consultant forensic scientist who was subject to a formal investigation after a patient in her care killed a member of the public during a period of unescorted leave; • The findings of the panel were that this was an isolated misjudgement on Dr. Mezey’s part which fell within the range of acceptable professional opinion; • The Trust sought to commence disciplinary proceedings against her even though its disciplinary policy provided that capability procedures could only commence where it was established that a practitioner’s capability to practise was in question. • The Court of Appeal held that this threshold had not been met. An injunction was granted prohibiting the Trust from commencing the disciplinary procedures against the Claimant. • The decision suggests that injunctive relief might be a more effective remedy than damages where the employee can establish that their employer is failing to follow a contractual disciplinary procedure.

Recent Bonus Cases James Laddie

Clause and Effect: An Expert Review of Developments in Employment-Related Contract Law