Case update (2): Breach of contract – false reasons for dismissal

Summary: Did an employer’s false explanation of reorganisation as the reason for dismissal (it was really poor performance) breach the implied term of trust and confidence?

Yes, says the EAT in Rawlinson v Brightside Group Ltd, available here.

Facts: Mr Rawlinson, the employee, was employed as Brightside Group’s, the employer’s, new Group Legal Counsel. Concerns about his capability were identified very early on but nothing was raised with him. Within four months it was decided that Mr Rawlinson’s position was untenable, but to “soften the blow” he was simply told that the company had decided to outsource its legal services because the current arrangements were not working. Mr Rawlinson was given his contractual three months’ notice and asked to keep working to ensure a smooth handover.

However, Mr Rawlinson believed the outsourcing would be a TUPE transfer and asked to whom the services were being outsourced. His line manager refused to comment. Mr Rawlinson became suspicious and considered that the Company was acting in breach of contract. He said that he was resigning in response to the breach and refused to work his notice period. Mr Rawlinson argued there is a duty on employers to be honest and not to mislead and proved the real reason for his dismissal by making a data subject access request.

Mr Rawlinson brought claims in the Tribunal for constructive wrongful dismissal for his notice pay, a failure to inform and consult under TUPE and a breach of the consultation requirements on a collective redundancy.

The Tribunal rejected his claims: there was no relevant transfer for TUPE purposes, and the company’s failure to forewarn Mr Rawlinson of performance concerns was not a breach of trust and confidence because was there was no obligation on the company to provide the information to him. The Tribunal also considered that his complaint was more about the manner of his dismissal for which damages cannot be awarded in a breach of contract claim.

Mr Rawlinson appealed to the EAT who upheld his unfair dismissal claim.  The EAT found that the term of trust and confidence implied into all employment contracts must include an obligation not to deliberately mislead. This does not mean an employer is under a broader obligation to volunteer information, such as a reason for dismissal. However, where the employer has provided a reason for dismissal, it must act in good faith. In other words, it must not give an untrue reason.

The EAT held that the employer was in breach of contract and Mr Rawlinson was entitled to rely on that breach and resign. As Mr Rawlinson’s complaint did not relate to the dismissal but to the falsehood told to him with a view to keeping the relationship alive during the notice period, he was entitled to damages for this breach.

Implications:  Understandably it is attractive for managers to soften the blow on dismissal.  However, this message of this case is that it is better to say nothing than to mislead and honesty is usually the best (employment) policy!

Employers are under increasing pressure to be more transparent with their employees in a wide range of areas, ranging from how employee data is used, to pay policies and practices and how that impacts on the gender pay gap and salary quartiles. This case is a reminder that the need for transparency extends also to dealing with employee relations and gives employers even more reason to train line managers, regularly manage performance through one-to-one meetings and, where performance is not up to scratch, have the, sometimes difficult, conversation about under-performance.