Constructive Dismissal and Bad References

The case of An Office Administrator and A Manufacturer ADJ-00026208 is interesting insofar as it asks the question of whether it is reasonable for an employee to resign their position on foot of an unfavourable reference given by their employer to a prospective employer. The employee in this case claimed she had to resign her position due to a broken bond of trust and stress brought upon by the actions of her employer in giving the unfair reference.BackgroundThe employee in this case was employed as an office administrator from 2011 until December 2019 when she resigned her position. The employed worked part time and had a good relationship with both directors of the Company but found one director more demanding than the other. In July 2018 the Company was going through a difficult business situation and the claimant applied for a secretarial/office position with a public body. She had a blemish free sick record and had no warnings or issues and often stayed late and prioritised Company work. The employee was successful in her job application subject to references and Garda checks. She submitted the name of both directors as referees.One of the directors gave the claimant a top score in each of the categories outlined whilst the second director, after some persistence by the claimant, scored her at the highest level in three categories, eight categories as satisfactory and five as unsatisfactory. The claimant was subsequently advised by the public body that “due to the receipt of unsatisfactory/reference we are unable to continue with the processing of your file for the post”.The claimant was devastated and felt the reference was unfair, untrue, did not reflect her performance and attitude at work and was designed to keep her in the Company due to the critical nature of her role. The claimant went on stress leave.Both the director who gave the claimant the favourable reference and a former employee of the Company gave evidence that the claimant was an excellent employee in terms of attitude, punctuality, professionalism, performance and willingness to train her when she joined.The claimant went on disability payment after she resigned and had applied for two education courses but was physically and mentally unable to look for work due to her treatment at work.The Company were notified of the hearing but chose not to attend due to concerns related to Covid-19.DecisionThe Adjudication Officer noted that”The claim is one of constructive Dismissal pursuant to Section 1 of the Unfair Dismissal Act 1977. The burden of proof, which is a very high one, lies on the Complainant. She must show that her 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”. Firstly, the Adjudicator must 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 Adjudicator 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”.The Adjudicator stated that the issues in this case relate more to a “reasonableness test” rather than a “contractual test” but essentially hinged on the bond of trust issue which was an “implied” contractual term and cut to the core of the question of whether the complainant’s resignation was reasonable and justifiable in all the circumstances due to the actions of her employer. In respect of the “contract test”, the Adjudicator noted that the employee had not satisfied this test nor did it put forward any significant argument in the case.The Adjudication Officer observed that the Complainant’s main argument was that the Bond of Trust had irrevocably broken down between the parties by the Company deliberately providing a third party with a reference for her that was designed to deny her getting the job at the third party, which she would have received if the reference was positive, and thus keep her her employment instead. He further noted:“It is not for the Adjudicator to decide on which of the two totally conflicting references, from the Directors, to the third party was the more accurate….. However, from the evidence of the Complainant and the Witnesses , the demeanor and character of the Complainant, the fact that there were never any prior poor performance reviews or disciplinary warnings in the Complainants unblemished time with the Respondent and the absence of any contradictory evidence from the Respondent as to his intentions giving the poor reference it is hard to see past the Complainants version of events and its serious consequences for her not getting the position with the third party and her subsequent stress and medical condition and consequently the bond of trust breaking down between her and the Respondent”.The Adjudicator noted that the Complainant must share some of the responsibility for the loss of the third party position as she had made the request of the Defendant to provide a reference without “checking out” what the Director was likely to say before she put forward a reference check. As the claimant had stated that the relationship was at times “difficult”, the claimant should have been made more aware of the possible type of reference she may receive.CaselawThe Adjudicator looked at 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. In this case 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 relationship. This was a term implied by law. Lord Nicholls noted the following.“The contrary argument of principle is that since the purpose of the trust and confidence term is to preserve the employment relationship and to enable that relationship to prosper and continue, the losses recoverable for breach should be confined to those flowing from the premature termination of the relationship. Thus, a breach of the term should not be regarded as giving rise to recoverable losses beyond those I have described as premature termination losses. In this way, the measure of damages would be commensurate with, and not go beyond, the scope of the protection the trust and confidence term is intended to provide for the employee. This is an unacceptably narrow evaluation of the trust and confidence term. Employers may be under no common law obligation, through the medium of an implied contractual term of general application, to take steps to improve their employees’ future job prospects. But failure to improve is one thing, positively to damage is another. Employment, and job prospects, are matters of vital concern to most people. Jobs of all descriptions are less secure than formerly, people change jobs more frequently, and the job market is not always buoyant. Everyone knows this. An employment contract creates a close personal relationship, where there is often a disparity of power between the parties. Frequently the employee is vulnerable. Although the underlying purpose of the trust and confidence term is to protect the employment relationship, there can be nothing unfairly onerous or unreasonable in requiring an employer who breaches the trust and confidence term to be liable if he thereby causes continuing financial loss of a nature that was reasonably foreseeable. Employers must take care not to damage their employees’ future employment prospects, by harsh and oppressive behaviour or by any other form of conduct which is unacceptable today as falling below the standards set by the implied trust and confidence term………….Such implied terms operate as default rules. The parties are free to exclude or modify them. But is common ground that in the present case the particular terms of the contracts of employment of the two applicants could not affect an implied obligation of mutual trust and confidence… It was a change in legal culture which made possible the evolution of the implied term of trust and confidence… The motives of the employer cannot be determinative, or even relevant, in judging the employees’ claims for damages for breach of the implied obligation. If conduct objectively considered is likely to cause serious damage to the relationship between employer and employee a breach of the implied obligation may arise. “ The Adjudicator observed that this case proved the concept of mutual obligation of the Bond of Trust between employers and employees and then considered the ‘reasonableness’ test whereby “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”.Core QuestionThe Adjudicator considered the core question to be as follows:Did the actions of the Respondent, considering the evidence available to the Adjudicator, amount to a significant breach of trust between the parties and did the action of the Complainant by resigning after a significant number of months, while on medical treatment and with medical advice not to return to her place of work, amount to reasonable grounds for constructive dismissal.He considered it important in a constructive dismissal claim that the Complainant satisfy the test set out by Lord Denning in Western Excavation (E.C.C) Ltd whereby the Complainant, must also show that she exhausted the internal grievance process prior to lodging her claim with any external body.The Adjudicator noted that two contracts of employment were submitted in evidence, the first one dated 2012 which contained no reference to a grievance procedure and the second which contained a reference to the grievance procedure which the Claimant stated she never saw. The Adjudicator observed that the Complainant questioned the dates of the contract which he stated were “unusual to say the least”.DecisionThe Adjudicator observed that from the evidence presented, the Complainant was both hurt and disappointed to lose the job and that the grievance issue was not work related but more of a personal career choice and trust issue between the Complainant and one of the Directors with “the opportunity for the Complainant to advance her career thwarted by the poor reference from the Owner”. He observed that it was not for him to apportion motive to the Respondent as the Director was entitled to provide the reference when asked. He observed however:“he surely must have known that the reference provided would scupper the opportunity for the Complainant to get the job with the third party and it is this action, rather than the accuracy of the reference itself, which contributed to the breach in the bond of trust between the parties. 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”.The Adjudicator found in favour of the Claimant in the uncontested evidence provided and that she had significant grounds to resign without invoking a grievance procedure due to the bond of trust being irrevocably broken down between the parties. The Claimant was awarded €9,000.