BREACH OF IMPLIED TERM OF TRUST AND CONFIDENCE

If an employer on dismissing an employee does not tell them the real reason for the dismissal can the employee resign and claim for breach of contract for their notice pay?  This was a question that the Employment Appeal Tribunal considered in Rawlinson v Brightside Group Ltd.

Facts

Mr Rawlinson worked as Group Legal Counsel at Brightside Group Ltd (Brightside).  His contract of employment provided for a three-month notice period.  The CEO who appointed Mr Rawlinson was dismissed a day after Mr Rawlinson started employment.  A new CEO took up appointment one month later.  He quickly identified concerns about Mr Rawlinson’s capabilities.  Although Mr Rawlinson was aware of some matters that needed to be addressed, Brightside did not raise any detailed concerns with him.

Instead, Brightside decided to dismiss Mr Rawlinson five months after he had joined.  As they wanted him to work his three-month notice period to effect an orderly handover it was decided to ‘soften the blow’ by informing him that the reason for his dismissal was due to outsourcing legal services.

Mr Rawlinson took the view that if the legal services were being outsourced this would constitute a ‘relevant transfer’ under the Transfer of Undertakings (Protection of Employment) Regulations 2006.  When Brightside refused to comment on who the legal services were being outsourced to, Mr Rawlinson considered that Brightside was acting in breach of the implied term of trust and confidence and immediately resigned in response to that breach.

Mr Rawlinson brought various claims, including a claim for constructive wrongful dismissal (for the balance of his notice pay).  He did not have the qualifying service to bring an unfair dismissal claim.

The tribunal rejected his claim holding that Brightside had not been obliged to give Mr Rawlinson a reason for the termination of his employment.  It was not legally required either to give him feedback about his performance, or to forewarn him of the intention to dismiss.

The tribunal considered Mr Rawlinson’s complaint was really about the manner in which he had been dismissed, which meant that under established case law, it was not possible to receive damages for breach of contract in respect of unfair treatment connected to a dismissal.

Mr Rawlinson appealed.

Decision

The EAT overturned the tribunal’s finding that there was no wrongful dismissal and awarded Mr Rawlinson his notice pay. The EAT held Mr Rawlinson’s complaint did not relate to the dismissal itself, but to the lie that was told to him to keep the contract alive during his notice period.  The EAT concluded that in all but the most unusual cases, the implied term of trust and confidence means an employer must not deliberately mislead, irrespective of their good intentions.  Although this does not mean that employers are put under a broader obligation to volunteer information.  However, where a choice is to do so, the implied term requires it to be done in good faith.

The EAT did acknowledge that there may be instances in where the operation of the implied term would permit some element of deceit (“the white lie that serves some more benign purpose”), but this was not the case here.

Comment

This case serves as a warning to employers who may be tempted not to be completely honest when providing reasons for dismissing employees.  There is no obligation to provide a reason if the employee has less than two years’ service (unless the employee is pregnant).  However, if you choose to do so, honesty is always the best policy.

This may be particularly relevant where an employee has a substantial contractual package.  In addition, giving a false reason for dismissal may release an employee from any post-termination obligations.

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