An employee's previous breach of contract will not prevent a constructive dismissal claim

In the recent case of Atkinson v Community Gateway Association, the Employment Appeal Tribunal has ruled that the fact the Claimant's employer was preparing a gross misconduct case against him did not prevent the Claimant bringing a claim for constructive unfair dismissal.

This case reminds employers about contract law issues relating to gross misconduct constructive dismissal.

Mr Atkinson was the Director of Resources at a Housing Association called Community Gateway Association ("CGA"). In late 2010, Mr Atkinson offered a termination package following the discovery of a £1.8million overspend. Mr Atkinson refused to accept the package and CGA commenced formal disciplinary proceedings.

During the investigation, carried out as part of the disciplinary process, it was discovered that Mr Atkinson had breached the Association's email policy by sending overtly sexual emails to a female employee at another Housing Association. It was also discovered that Mr Atkinson had encouraged the female employee to apply for a vacancy at the Association, and had also suggested to the colleague conducting the recruitment that she should be appointed (without disclosing his personal relationship with her).

Following the investigation, a formal disciplinary hearing was fixed for 9th March 2011. However, after various disagreements and postponements Mr Atkinson resigned with immediate effect on 14 March 2011 and brought a claim for constructive unfair dismissal.

Mr Atkinson's claim was struck out by the Employment Tribunal, on the basis that his claim was barred by law because of his own prior repudiatory breaches of contract, in relation to his breaches of the email policy and his conduct in relation to the job vacancy.

The Tribunal's analysis was that his behaviour amounted to gross misconduct, and therefore to a repudiatory breach of contract which allowed the Association (as the innocent party) to terminate his employment contract.

The EAT however overturned that decision, and held that Mr Atkinson's prior breach of contract did not prevent him from making a claim.

The EAT followed the judgment of the Court of Session in McNeill v Aberdeen City Council, where it was found that "if one party commits a fundamental or repudiatory breach… and the other does not accept that breach as bringing the contract to an end, whether because he does not know about the breach or otherwise, the contract continues." As the Association had not (yet) accepted Mr Atkinson's breaches as bringing the contract to an end (by dismissing him for gross misconduct), Mr Atkinson's employment contract remained in force and Mr Atkinson was therefore free to bring a constructive unfair dismissal claim after his resignation.

However, there is light at the end of the tunnel for employers as the EAT did not finish there. The EAT went on to say that an Employment Tribunal would be expected to consider reducing compensation if the dismissal was found to be unfair "if it was established that, because of the employee's original breach he could and, if the employers had known about it, would have been fairly dismissed in any event". In this situation the reduction on the compensatory award could be as much as 100%, if appropriate.