Employment Law E-Bulletin Issue 29

• Constructive dismissal and affirmation of contract – Chindove v William Morrisons Supermarket plc UKEAT/0201/13
• Paternity and Adoption Leave (Amendment) Regulations 2014 published.
• Deduction for failure to serve notice period was not a penalty clause (EAT) – Yizhen Li v First Marine Solutions and another UKEAT/0045/13

Constructive dismissal: delay in resignation because of sick leave (EAT) – Chindove v William Morrisons Supermarket plc UKEAT/0201/13

In this case, the Employment Appeal Tribunal (EAT) considered whether an employee on sick leave had delayed his resignation too long for the purpose of a constructive dismissal claim.

An employee will be constructively dismissed if they resign in response to their employer’s repudiatory breach of contract. If an employer is in repudiatory breach of contract then the employee must accept the breach and resign in response to it. They cannot delay too long or they may be deemed to have affirmed the contract.

Under the “last straw” doctrine, an employee can resign in response to a series of breaches of contract or a course of conduct by their employer. Even if the last breach is insubstantial, when considered together with the rest of the course of conduct, it can amount to a repudiatory breach.

Mr Chindove, was a Warehouse Operator for William Morrisons Supermarket plc and suffered two incidents of alleged racial harassment and discrimination. Following the first incident in December 2010 Mr Chindove made a complaint to the General Manager, who promised to try and resolve the matter and report the outcome of his investigation. This did not happen.

Following a second incident 3 months later, Mr Chindove submitted a written grievance to the Operations Manager who decided there was no evidence on which he could take action. Mr Chindove escalated his grievance to his employer’s head office and went on sick leave in August 2011. In September, Mrs Atwell, the Human Resources Manager, reported her findings.

Mr Chindove sought to further progress the grievance under Morrison’s ‘special complaint’ procedure. He received a letter inviting him to discuss the matter on 11 October 2011 but one week later resigned his position and brought claims of constructive unfair dismissal and race discrimination. The tribunal dismissed both claims.
Mr Chindove appealed to the EAT on two grounds:

• The six-week delay in his resignation did not preclude him from claiming constructive dismissal.
• There was a continuing act of discrimination which encompassed Mrs Atwell’s delay until 9 September 2011 and brought the race discrimination claim within time.

The EAT allowed both points of appeal and remitted the claim to a different tribunal for re-hearing. They held that the test for constructive dismissal is one of conduct, not time. Inferences cannot be drawn so easily from an employee’s delay in resigning when they are on sick leave.

Points to note

• The key point to take from this case is that tribunals will likely treat periods of delay when an employee is off sick differently to a period of delay when they are at work.
• A time delay will not be considered on its own but together with an employee’s overall conduct in the circumstances.
• When comparing this case to the case of Cockram v Air Products plc (see July’s Bulletin) it would also seem that the employer’s motives for resigning will have an effect on the outcome. In Cockram the ET decided that the employee had his own financial motives at heart, rather than a response to the employer’s conduc

Paternity and Adoption Leave (Amendment) Regulations 2014 published.

The draft Paternity and Adoption Leave (Amendment) Regulations 2014 have been published. They will amend the Paternity and Adoption Leave (Amendment) Regulations 2002, partly as a result of the forthcoming right to shared parental leave.

The proposed amendments will introduce protection for employees who suffer a detriment or are dismissed in relation to taking time off to accompany a woman to ante-natal appointments from 1 October 2014.
They also mean that, from 1 December 2014:

• employees cannot take paternity leave in relation to a child if they have already taken shared parental leave in relation to that child; and
• the provisions on the right to return after paternity or adoption leave will have to be amended.

In addition, as from 5 April 2015:

• the current requirement for 26 weeks’ service before becoming entitled to adoption leave will likely be removed;
• employees will not be able to take paternity leave if they have exercised a right to take paid time off to attend an adoption appointment in respect of that child; and
• employees will be protected against suffering a detriment or being dismissed in relation to taking time off for adoption appointments.

Deduction for failure to serve notice period was not a penalty clause (EAT) – Yizhen Li v First Marine Solutions and another UKEAT/0045/13

The EAT considered whether a clause deducting a month’s salary for an employee’s failure to work their notice period constituted a penalty clause.

A clause in an employment contract can provide for liquidated damages, where a pre-determined sum is payable upon breach such as paying or forfeiting a month’s salary where the employee does not work their notice. However, unless it is a genuine pre-estimate of the employer’s losses, the clause may be unenforceable for being a penalty. In particular, if the provision is intended to be punitive rather than compensatory the clause is likely to constitute a penalty.

The claimant, Miss Li, was employed by First Marine Solutions Ltd (FMS) and appointed as the principal engineer on a contract.  A dispute arose between the claimant and FMS and Miss Li resigned and claimed constructive dismissal. The tribunal found that there had been no repudiatory breach and therefore no constructive dismissal.

The dispute arose over a clause in the claimant’s employment contract which provided:

“Either the Company or the Employee may terminate the Employee’s employment hereunder by notice in writing of not less than [one month] which may be from time to time adjusted… If an Employee leaves, without working the appropriate notice, the Company will deduct a sum equal in value to the salary payable for the shortfall in the period of notice”.

The claimant gave notice on 18 July, and did not work her notice period as she asserted that she had enough remaining holiday to cover her one month notice period which would expire on 31 August. In a letter dated the day after her resignation, FMS stated that she was due £3,000 salary for the period to 18 July and £2,835.62 in expenses. From that sum FMS made a deduction of one month’s salary (£5,000) under clause 12 for the shortfall in the notice period.

The employment tribunal held that the clause was enforceable. The Claimant had not worked her notice period (she did not have holiday remaining), and it was difficult and expensive to recruit a replacement at short notice. Miss Li appealed.

The EAT held that a tribunal had been correct to conclude that the relevant clause was a genuine pre-estimate of loss, rather than a penalty, and was therefore enforceable.

Points to note:

• This is quite a striking decision. Miss Li had resigned and was leaving. Even if she had worked her period of notice, the employer would have had to incur recruitment costs.
• However, it would appear that the courts will enforce this type of clause if the employer can justify its need. For example, that it has to pay a premium to get a replacement employee on short notice.