Fundamental contract breach



For a constructive dismissal claim to succeed, the breach of contract must be fundamental, in other words, very serious. It must show that the employer “altogether abandons and refuses to perform” its side of the contract (Wright v North Ayrshire Council [2013] UKEAT 0017/13/2706). More than just unreasonable behaviour is needed.



The contract term that is broken can be express (that is, specifically agreed, whether or not in writing) or implied. A common example is the implied duty of mutual trust and confidence, which is fundamental to every employment contract. 



Whether there has been a fundamental contract breach is a factual question for a tribunal to decide after looking at all the evidence, reading the witness statements and listening to cross-examination. Every case is different, but some examples of fundamental contract breach have included:


• unilaterally cutting pay or hours;



• unilaterally relocating employees to a new site, a significant distance from the old site;



• fundamentally changing duties;



• demoting;



• wrongly withholding contractual sick pay;



• using foul language;



• publicly humiliating an employee;



• engaging in bullying or harassment;



• issuing a sanction such as a Final Warning without investigation;



• failing to investigate a grievance properly and adequately; 



• refusing to allow an employee to be represented by their chosen companion;


• engaging in unlawful discrimination; and


• Inappropriately writing to an employee on sick leave with work-related depression and anxiety raising “concerns” that were neither serious nor urgent (see page 299).



Employment contracts frequently include express written terms that purport to allow the employer to make changes to contract terms or ways of working without consent, sometimes called “flexibility” terms. These terms, discussed on page 84 of Chapter 3, can make it much harder to succeed in a constructive dismissal claim. This is because they enable the employer to argue that by signing the employment contract containing the relevant term, affected employees have already consented to future changes (for example, changes to wage arrangements or hours, or cutting pay in a downturn). If the consent is valid, there will be no breach of contract, and therefore no constructive dismissal.



Despite the presence of a clear flexibility term, an employer who forces through such a change without proper consultation may be found to have fundamentally breached the implied contractual duty of mutual trust and confidence (see Chapter 3, page 87).



Where protected groups are affected, there may also be unlawful discrimination in breach of the Equality Act 2010 (see Chapter 7). 



There can be a fundamental breach of contract even if an employer mistakenly believes they are acting lawfully (Roberts v The Governing Body of Whitecross School [2012] UKEAT 0070/2/1906). 



If an employer fundamentally breaks the contract, the employee is no longer bound by the rest of its terms, except as to confidentiality.