Can demotion for gross misconduct amount to unfair constructive dismissal?

The answer to that question was held to be, no, in the case of Wells v Countrywide Estate Agents t/a Hetheringtons. The case is interesting in that even if a dismissal amounts to constructive dismissal, due to an employer acting on fundamental breach the resulting dismissal will not necessarily be unfair.

Background to the case

The claimant was an estate agent branch manager. He was dismissed following an investigation and disciplinary process which related to his failure to comply with obligations on estate agents and to take steps to combat money laundering. The respondent considered this to be a serious matter and the claimant was dismissed on grounds of gross misconduct. The claimant was dismissed without notice.

The claimant appealed and the decision of the internal appeal was that the decision to dismiss was too harsh in the circumstances.

The appeal decision-maker decided that, despite there being no contractual right to do so, it would be appropriate to demote the claimant to the role of senior negotiator. In addition to the demotion, the claimant would be subject to supervision and monitoring. This was to ensure that the claimant complied with the respondent’s money laundering requirements.

Following the demotion, the claimant resigned. The claimant claimed constructive dismissal.

The claimant stated that there had been a fundamental breach of trust and confidence and that the sanctions imposed were oppressive and a breach of contract.

At Employment Tribunal, the claimant argued that he had been unfairly and wrongfully dismissed. The Employment Judge considered the original dismissal. He found that the respondent had acted properly in dismissing the claimant. The Employment Judge then went on to find that, although the demotion and other terms may have involved a breach of contract, that breach was not so fundamental that it could not give rise to constructive dismissal. He also found that, in any event, the constructive dismissal was not unfair.

Accordingly, the claimant appealed to the Employment Appeal Tribunal (EAT).

At the EAT, the appeal was dismissed.

It was found that because the respondent had acted fairly in originally dismissing the claimant; there could be no finding of constructive dismissal because demotion was a less serious sanction than dismissal.

What does this mean for me?

The case is interesting from a technical point of view, in that even if a dismissal amounts to constructive dismissal, due to an employer acting on fundamental breach, the resulting dismissal will not necessarily be unfair if:

• there is nevertheless a potentially fair reason for the employer’s actions, and
• the dismissal is fair in all the circumstances.

It is also interesting because it involves consideration of an employer demoting an employee where there is no contractual right to do so.

In this instance there could not be a successful claim of constructive dismissal because the respondent had acted fairly in finding that it had grounds to dismiss fairly in the first instance. As dismissal was a more serious sanction than demotion, it could not be said that demotion (a less severe sanction) could amount to a breach of contract.

Comment

The claimant in this case failed because the respondent had acted fairly in finding that the claimant should be dismissed at the disciplinary hearing. It is likely that the claimant would not have contemplated constructive dismissal action if there was a specific contract term (or a statement the respondent’s disciplinary policy) to the effect that demotion could be an appropriate sanction in disciplinary cases.

Employer’s are advised to review the terms of their disciplinary policies before deciding on a disciplinary sanction in order to ensure that they have the necessary rights to enforce the disciplinary sanction that they want to enforce.

Get in touch

If you’d like to discuss disciplinary processes and dismissals further, then please contact a member of our employment team.

• Ewan Stafford   |   01463 795 004