Legal

How employees could inadvertently waive a contract breach

7 Apr 2021 By Chris Thompson

In light of a recent EAT ruling, Chris Thompson explains what contract affirmation is and the impact it may have on raising appeals and grievances

If an employee resigns in response to a fundamental breach of the employment contract they will be treated as having been dismissed. If they have more than two years’ service, they could make a claim to the employment tribunal that they have been unfairly constructively dismissed. However, the employee will not be treated as having been constructively dismissed if, following the breach, they affirm the contract, as that would in effect waive the breach. Affirmation of the contract could happen where the employee delays their resignation or they do something that is in reliance on the contract terms. This issue was considered in Gordon v J&D Pierce (Contracts).

Facts

Mr Gordon had been employed as the commercial manager in a construction company. Concerns had been raised about slow cashflow into the business and as a result Gordon had been subjected to a great deal of criticism. In particular, before a meeting that he had been told to attend with a client, there were a number of emails sent that Gordon regarded as offensive, and he therefore did not attend the meeting. As a result, he was suspended from work pending a disciplinary hearing, which he also failed to attend. 

The disciplinary process ended with him being issued with a final written warning. Gordon remained absent from work having sent in a sick note. He appealed the disciplinary outcome and at the same time raised a grievance against his manager with allegations of bullying behaviour. Following further correspondence and meetings to discuss the appeal and his grievance Gordon resigned and presented a claim that he had been constructively dismissed.

Decision

Gordon’s claim of constructive unfair dismissal was unsuccessful. There had been incidents of unreasonable conduct by both parties, but nothing had been identified as sufficient to amount to a breach that would give grounds for his resignation. 

In any event, the employment tribunal held that by appealing the disciplinary sanction and lodging the grievance, Gordon had affirmed the contract so could not rely upon any prior conduct as amounting to a breach of the contract.

On appeal, the tribunal’s conclusions relating to whether there had been a breach were upheld. However, the Employment Appeal Tribunal did not agree that Gordon had affirmed the contract by engaging the right of appeal or by raising a grievance. It held that taking part in these processes should not be regarded as an indication that the contract has been affirmed. Appeal and grievance provisions in a contract had to be recognised as severable from the remainder of the contract so that they could be engaged even where for all other purposes the employment contract has been brought to an end.  

Key points

In practice, this decision confirms that an employee is able to appeal a decision they consider is wrong or raise a grievance concerning conduct they regard as unacceptable without it later jeopardising their ability to subsequently rely on the decision or conduct as being the fundamental breach that has caused their resignation. 

It does not mean that an employee always has to appeal or raise a grievance before resigning. However, failing to do so could, in some circumstances, run the risk that the award of compensation may be reduced by as much as a quarter if it is found that the claimant had acted unreasonably in not doing so. 

Claimants will still need to keep in mind that the greater their continued participation in work and the longer the delay between the alleged fundamental breach and the resignation, the more at risk they will be that any breach will be deemed to have been waived.   

Chris Thompson is an employment partner at Gateley Legal

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