What is a fundamental breach of the contract?

There will be a fundamental breach of the contract entitling the employee to resign and claim constructive dismissal when the employer has broken a core term that goes to the root of the contract.

Whether there has been a fundamental breach of contract is a question of fact for a tribunal to decide, after looking at all the evidence, reading the witness statements and hearing all the witnesses being cross-examined. Every case is different, but some examples from case law include:

• Offering an employee money to leave after she asked to change her working arrangements to accommodate her baby’s cerebral palsy (Bates Wells & Braithwaite v MacFarlane EAT/0616/02).

• Using foul and abusive language (Horkulak v Cantor Fitzgerald [2003] EWHC 1918).

• A supermarket employee being publicly reprimanded by her manager and not being given any chance to respond (Morrow v Safeway Stores [2002] IRLR 9).

• Issuing a final warning without a proper investigation (Thakeray v Acequip EAT/0396/03).

• Issuing a final warning for an offence which any reasonable employer would have regarded as minor (Stanley Cole (Wainfleet) Limited v Sheridan EAT/0824/01).

• Cutting pay and increasing duties (Governing Body of St Edmond of Canterbury Catholic High School v Hines EAT/1138/02).

• Transferring an employee to a higher graded post where the result was to deprive the employee of previous pay protection (LB Camden v Collins & Clements EAT/1436/01).

• Unilaterally changing a contractual fixed London allowance (Security and Facilities Division v Hayes [2001] IRLR 81).

• Instructing an employee to change her hours in conflict with her domestic responsibilities (Greenaway Harrison v Wiles [1994] IRLR 380). The employer argued that she had jumped the gun by resigning before the change was implemented, but the EAT ruled that there was a breach of contract.

• Deciding to pay the national rate only, and ignoring the previous collectively agreed local rate which was incorporated into the employee’s contract (Gibbons v Associated British Ports [1985] IRLR 376).

• Replacing full time work with part time work (Hogg v Dover College [1990] ICR 39).

• Transferring employees to new work where there was nothing in the contract to allow for this (Hughes v Southwark [1988] IRLR 55).

• Demoting an employee by removing his managerial role and cutting pay by one third after he posted a comment on a Facebook Wall at the weekend, expressing negative views about gay marriage (Smith v Trafford Housing Trust [2012] EWCA 3221).

If an employer fundamentally breaches the contract, the employee is no longer bound by the terms of that contract (except as to confidentiality) unless there is an express term that says otherwise. However, it must be a fundamental breach that goes right to the root of the contract (CRS Computers v McKenzie EAT/1259/01).

The fundamental breach of contract does not have to be the main reason for dismissal, as long as it is one of the reasons (Logan v Celyn House Limited UKEAT/2012/0069/12/1907). However, if it is not the main reason for the dismissal, any compensatory award is likely to be very small, because the tribunal is likely to conclude that the employee would have resigned anyway, regardless of the employer’s actions.