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Substantial Change 'Constructive Dismissal' - the New Watered Down Route to Constructive Dismissal

Under the TUPE Regulations 1981, it was always possible for an employee to make a claim for constructive dismissal when, after the transfer, the new employer had broken or threatened to break the employee's terms and conditions that had transferred under TUPE. As a general principle of course constructive dismissal in the traditional sense comprises of the following:

• The Employer has committed a serious breach of the contract (i.e. a repudiatory breach).
 

• The Employee has left because of the breach.
 

• The Employee has not waived the breach by affirming the contract in some way, for example done anything to accept the changed basis of his employment or TUPE transfer.
 

• Every breach of the implied term of trust and confidence is a repudiatory breach of contract (Morrow v Safeway Stores [2002] IRLR 9).
 

• Although the correct approach to constructive dismissal is to ask whether the employer is in breach of contract and not whether the employer acted unreasonably, if the employer's conduct is seriously unreasonable, that may provide sufficient evidence that there has been a breach of contract (Brown v Merchant Ferries Ltd [1998] IRLR 682).
 

• There can be a constructive dismissal even where the employer acts on a genuine, although mistaken, belief (Brown v JBD Engineering Ltd [1993] IRLR 568).
 

• Even if the employer's act which was the proximate cause of an employee's resignation was not by itself a fundamental breach of contract, the employee may rely upon the employer's course of conduct considered as a whole in establishing that he was constructively dismissed. The ‘last straw' must contribute however slightly to the breach of trust and confidence (London Borough of Waltham Forest v Omilaju [2005] IRLR 35).


Watered Down Version

Although the above principles have been retained, the TUPE 2006 regulations create a new right for an employee to claim constructive dismissal where there has been "a substantial change to the employee's working conditions to his material detriment". This additional claim can be pursued by an employee without having to show that the change in terms and conditions also amounts to a breach of contract. In other words, the Regulations remove the traditional need to demonstrate a repudiatory breach of contract in this discrete area of employment law.

The courts and tribunals have not yet decided what exactly will satisfy the new definition, but DTI guidance suggests that a major relocation of workplace, making it more difficult or expensive to get to work, is likely to be enough. One can imagine that relocation, resulting in an increase in commuting time, could be a substantial change to an employee's detriment. This will be accentuated for example, if the relocation disrupts childcare arrangements. In these circumstances, resignation may constitute dismissal, and would also likely amount to an ‘automatically unfair dismissal' on the grounds that it was related to the transfer - although DTI guidance suggests tribunals should still apply the reasonableness test). While we have yet to see how courts and tribunals address this point, on the face of it, a claim for automatically unfair dismissal could succeed without any unlawful action on an employer's part. Employers may be quite legitimately worried that they may no longer safely be able to change even such non-contractual terms of an employment contract in a material way such as the terms of a discretionary bonus or commission scheme without risking liability for a claim by the employee.

There are, however, practical measures for employers to avoid the pitfalls of substantial change dismissal in seemingly innocuous circumstances. The best advice is to consult with the employee at all times, to review possible solutions to their difficulties by focusing on alternatives, and to ensure that the company acts reasonably at every stage. This will certainly make it more difficult for an employment tribunal to find that the employer has acted unreasonably.

Objection and re-engagement

Under TUPE 1981, employees could object to a transfer of their employment to a Transferee. That right is preserved in TUPE 2006, but it is now accompanied by a new provision that stipulates that, where this right is exercised, the employee shall be treated as having resigned. Some commentators have speculated that this may gave rise to the use of "objection and re-engagement" as a way of effecting changes to an employee's contract that would otherwise be prohibited (Transferee and employee agree that the employee will object to his transfer, cease to be employed, and then be re-engaged on new terms). It remains to be seen whether the tribunals allow Transferees to exploit this "back door" approach, particularly where there is reason to suspect that employees have been coerced into objecting to their transfer so as to facilitate a variation of their contract.

Conclusions

One of the greatest frustrations that transferees experienced with TUPE 1981 was that the legislation precluded them from harmonising the terms of employment of employees transferring to them and those of their existing workforce, where to do so would require transferring employees to accept terms less favourable than those which they were previously employed under. Under TUPE 2006, it seems that it will be harder than ever to do this because of the removing of a breach of contract amounting to constructive unfair dismissal.

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