Guide to Constructive Dismissal in Ireland

Constructive Dismissal Under Irish Employment Law

Section 1(b) of the Unfair Dismissals Act defines constructive dismissal as “the termination by the employee of his/her contract of employment with his/her employer, whether prior notice of the termination was or was not given to the employer, in circumstances in which because of the conduct of the employer, the employee was or would  have been entitled, or it was or would have been reasonable for the employee, to terminate the contract of employment without giving prior notice of the termination to the employer”.

The Unfair Dismissals Act envisages two circumstances in which a resignation may be considered a constructive dismissal.

(Also see A Guide to Unfair Dismissal in Ireland)

Contract Test

The first arises where the employer’s conduct amounts to a repudiatory breach of the contract of employment and in such circumstances the employee would be “entitled” to resign his position, often referred to as the “contract test”. This requires that an employer be “guilty of conduct which is a significant breach going to the root of the contract of employment, or which shows that the employer no longer intends to be bound by one or more of the essential terms of the contract, then the employee is entitled to treat himself as discharged from any further performance” as held in Western Excavating (ECC) Ltd. v Sharp.

(Also see Non Payment of Wages and Unfair Dismissal)

Reasonableness Test

There is an additional reasonableness test which may be relied upon as either an alternative to the contract test or in combination with that test. This test asks whether the employer conducted his or her affairs in relation to the employee so unreasonably that the employee cannot fairly be expected to put up with it any longer, if so he/she is justified in leaving. The question for the Workplace Relations Commission to decide is whether, because of the conduct of the employer, the employee was or would have been entitled, or it was or would have been reasonable for him/her to terminate their contract of employment.

By way of example, it was recently held that the covert monitoring of an employee without her consent was a significant breach of the trust and confidence between the parties, so much so that the employee was entitled to tender her resignation (see Employer Surveillance, Consent and Constructive Dismissal).

The burden of proof, which is a very high one, lies on the employee. The employee must show that their resignation was not voluntary.

As is set out in Western Excavating ECC Limited –v- Sharp, the legal test to be applied is “an and / or test”.

The WRC must first look at the contract of employment and establish whether or not there has been a significant breach going to the root of the contract “if the employer is guilty of conduct which is a significant breach going to the root of the contract of employment, or which shows that the employer no longer intends to be bound by one or more of the essential terms of the contract, then the employee is entitled to treat himself as discharged from any further performance”. 

If the WRC is not satisfied that the “contract” test has been proven, then it is obliged to consider the “reasonableness” test “the employer conducts himself or his affairs so unreasonably that the employee cannot fairly be expected to put up with it any longer, then the employee is justified in leaving”.

Proving a Claim for Constructive Dismissal

In a constructive dismissal claim, the burden of proof shifts to the person making the claim, the employee.

They also have to demonstrate that they were justified in their decision and it was reasonable for them to resign.

The employee needs to demonstrate that they have no option but to resign.

In addition, there must have to be something 'wrong' with the employer’s conduct.

Breach of Trust and Confidence

In circumstances were the contract test has not been significantly advanced or satisfied, the WRC may look at the ‘reasonableness’ test and examine whether the employer conducted himself or his affairs so unreasonably that the employee cannot fairly be expected to put up with it any longer, then the employee is justified in leaving. 

The 'Bond of Trust' issue is best set out in the leading UK case of Malik and Mahmud v Bank of Credit and Commerce International SA [1997] UKHL 23, which confirmed the existence of the implied term of mutual trust and confidence in all contracts of employment.

Mr Malik and Mr Mahmud both worked for the Bank of Credit and Commerce International. BCCI went insolvent due to massive fraud, connection with terrorists, money-laundering, extortion and a raft of other criminal activity on a global scale. Malik and Mahmud had both lost their jobs and they sought employment elsewhere. They could not find jobs. They sued the company for their loss of job prospects, alleging that their failure to secure new jobs was due to the reputational damage they had suffered from working with BCCI.

Nobody, they said, wanted to hire people from a massive fraud operation like that at the company. This raised the question of what duty the company had owed to its employees that had been broken. Although there was no express term in their contracts, Malik and Mahmud argued there was an implied term in their employment contract that nothing would be done calculated to undermine mutual trust and confidence.

The House of Lords unanimously held that the term of mutual trust and confidence would be implied into the contract as a necessary incident of the employment relation. This was a term implied by law.

Constructive Dismissal and Irish Case Law

In Berber v Dunnes Stores Finnegan J stated:

“The conduct of the employer complained of must be unreasonable and without proper cause and its effect on the employee must be judged objectively, reasonably and sensibly in order to determine if it is as such that the employee cannot be expected to put up with it”.

In Murray v Rockavill Shellfish Ltd it was affirmed that:

“It has been well established that a question of constructive dismissal must be considered under two headings, Entitlement and Reasonableness. An employee must act reasonably in terminating his contract of employment. Resignation must not be the first option taken by the employee and all other reasonable options including following the grievance procedure must be explored. An employee must pursue his grievance through the procedure laid down before taking the drastic step of resigning”.

In UD142/1987 Beatty v Bayside Supermarkets it was noted that:

“The Tribunal considers that it is reasonable to expect that procedures laid down in such agreements be substantially followed in appropriate cases by employer and employee as the case may be, this is the view expressed and followed by the Tribunal in Conway v Ulster bank Ltd 474/1981. In this case the Tribunal considers that procedure was not followed by the Claimant and that it was unreasonable for him not to do so. Accordingly, we consider that applying the test of reasonableness to the Claimant’s resignation he was not constructively dismissed”.

Using Internal Grievance Procedures before Resignation

The requirement to substantially utilise internal procedures is an essential element of succeeding in a claim of constructive dismissal. This is set out in the case of Conway v Ulster Bank Ltd. (UD 474/1981) whereby the Employment Appeals Tribunal stated that:

“the appellant did not act reasonably in resigning without first having substantially utilised the grievance procedure to attempt to remedy her complaints.”

Similarly, in Travers v MBNA Ireland Ltd it was noted that:

“We find that the claimant did not exhaust the grievance procedure made available to him by the respondent and this proves fatal to the claimant’s case. In constructive dismissal cases, it is incumbent for a claimant to utilise all internal remedies made available to him unless good cause can be shown that the remedy or appeal process is unfair.”

It is well established that the employee is required to exhaust the company’s internal grievance procedures in an effort to resolve their grievance prior to resigning and initiating a claim for unfair dismissal. 

In UD1350/2014 M Reid v Oracle EMEA Ltd it was stated that: 

“It is incumbent on any employee to utilise and exhaust all internal remedies made available to him or her unless he can show that the said remedies are unfair.”

In Tierney v DER Ireland Ltd it was stated that: 

“... central to this is that she shows that she has pursued to a reasonable extent all internal avenues of appeal without a satisfactory or reasonable outcome having been achieved”.

However, in Office Administrator v A Manufacturer ADJ-00026208, it was held that, in the absence of a clear grievance procedure, and given the breakdown in trust and confidence between the parties, there was no need to exhaust the grievance procedure:

"In the context of the issue involved the use of a grievance procedure was both pointless and also unclear if indeed there was one in existence, based on the contractual evidence of the employee.

Overall, I find that the Complainant, in the uncontested evidence provided, had significant grounds to resign, without invoking a grievance procedure, due to the Bond of Trust being irrevocably broken down between the parties and accordingly I find the Complainant to be unfairly dismissed."

(Also see Unfair Dismissal, Constructive Dismissal and Raising a Complaint before Resignation)

Takeaway

Harkin v Guinness Storehouse Ltd provides a useful summary of constructive dismissal law in Ireland, wherein it was sated that there must be a breach of an essential term of the contract which goes to the root of the contract and it must be reasonable for the employee to resign because the employer has acted so unreasonably that the employee could not be fairly expected to put up with it any longer.

As set out in the above cases, for an employee to succeed in claiming constructive dismissal, they must establish that the conduct of the employer was such that they had no option but to resign their position.