Ellie Gilbert examines how a recent High Court decision affects an employee’s ability to resign, spend months working their notice period, and still claim constructive unfair dismissal.
The recent High Court case of Brown & Another v Neon Management Ltd & Another concerned a complicated dispute regarding restrictive covenants, breach of contract and bonus and commission payments arising from a contentious team move.
One issue to decide was whether the employees had affirmed the employment contract by resigning on notice (6 and 12 months), and the High Court’s decision is certainly helpful for employers on this point. The employees argued that they had not affirmed their contracts and that their restrictive covenants had therefore fallen away and could not be enforced. The point on affirmation is also relevant to claims of constructive unfair dismissal.
For an employee to succeed in a claim of constructive unfair dismissal:
- the employer must have repudiated the employment contract (for example, by breaching the implied term of trust and confidence);
- the employee must resign in response to that breach; and
- the employee must not have affirmed the employment contract and must not delay too long before accepting the breach.
Where an employee resigns purportedly in response to a breach of contract by the employer and claims they have been constructively dismissed, strictly speaking under the Employment Rights Act 1996, they are able to resign with or without notice, as long as they are entitled to resign without notice. However, resigning on notice and agreeing to work throughout this period is inconsistent with the requirement that the employee must not affirm the employment contract (point 3 above).
The High Court has given some welcome clarification for employers on this point. It held that resigning on long notice (of 6 months or more) would affirm the contracts of employment since it is well-established that the employee must not leave it too long before resigning otherwise he/she will be taken to have affirmed the contract.
As a result of this case, employees who resign on long notice of 6 months or more in response to a breach of contract and seek to argue that their restrictive covenants fall away and/or bring a claim of constructive unfair dismissal, will have more difficulty. If they want to pursue these arguments/claims, then they ought really to resign without notice and forgo the security of notice pay.
However this is a High Court case concerning a team move situation and dispute about restrictive covenants and the Employment Tribunal could take a different view about a claim of constructive unfair dismissal. It would be bound to take into account the High Court’s decision, but it may also attach considerable weight to the wording of the Employment Rights Act regarding resigning on notice and would analyse the employee’s reasons for giving notice and how much notice was given. The Tribunal may, in the context of a constructive unfair dismissal claim, accept that it was understandable for the employee to resign on notice if they did not have another job lined up and were not in the financial position to resign without notice.