By engaging and using the employer's arbitration process, does an employee affirm his or her contract of employment and forfeit the right to claim constructive dismissal?

By engaging and using the employer's arbitration process, does an employee affirm his or her contract of employment and forfeit the right to claim constructive dismissal?

Is an employee still entitled to constructive dismissal whether he or she insists that his or her employer has violated the contract of employment and persists in the arbitration procedure? Gordon v J & D Pierce (Contracts) Ltd, a recent UK case, is examined.

Background

1. The employee argued that he was constructively fired and that his boss had violated the parties' implicit trust and confidence agreement. According to the Employment Tribunal (the "Tribunal"), the contractor did not violate the implicit duty of trust and confidence, as determined by the test in Malik v Bank of Credit and Commerce International SA [1997] UKHL 23, and therefore the employee was not entitled to regard the contract as terminated and seek constructive dismissal.
2. However, even though there had been a breach of contract entitling the employee to claim constructive dismissal, the Tribunal determined that he could not succeed because he had affirmed the contract of employment by participating in the employer's grievance procedure, which was part of the contract of employment, thus forfeiting his right to rely on the prior breach of that contract and in particular t
3. The employee filed an appeal with the Employment Appeal Tribunal (the "EAT") against the Tribunal's ruling.

Affirmation in Contract- Legal Principles

1. In general, where a contract is repudiated by a party's extreme violation of contract, the innocent party has the option of treating the contract as ended by the other party or affirming the contract's continued life.
2. The EAT cited Underhill, LJ's statement in Kaur v Leeds Teaching Hospitals NHS Trust [2018] 4 All E.R. 238 that "exercising a right of appeal against what is said to be a seriously unjust administrative action is unlikely to be regarded as an unequivocal endorsement of the contract."
3. The EAT pointed out that a contract is a set of commitments, some of which are interdependent and others of which have distinct and severable purposes, and that reliance on one contractual right does not always imply recognition of all other contractual rights. As a result, expressing a right of redress or appeal, which is itself a kind of objection to the applicable actions under the contract's specialized and substantive terms, should not be treated as an endorsement of the contract in its entirety.

Decision:

The EAT ruled that the Tribunal's decision on the matter of violation of the implicit duty of trust and faith did not mean that the incorrect test had been used. As a result, the EAT reached the conclusion that there was no constructive unfair dismissal.

However, following Kaur, on the separate matter of contract affirmation (if there had been a constructive dismissal), the EAT maintained that the employee did not affirm the contract by using a grievance procedure provided under the contract of jobs. The EAT, in particular, stated:

“Grievance or appeal provisions may be regarded as severable from the remainder of the contract and capable of surviving independently even though the remainder of the contract is properly regarded as terminated through breach.  It appears to me that where an employee intimates that he considers the contract has come to an end, he is not to be taken to affirm that the contract has come to an end for all purposes. In particular I do not consider that the parties can be presumed to intend that a clause designed to procure the resolution of differences should be regarded as being evacuated because one party asserts that the implied obligation of trust and confidence has been breached.”

Conclusion

Despite the fact that this is a UK case, Hong Kong law follows similar common law rules, and the situation there is expected to be the same or somewhat similar. Gordon v J & D Pierce (Contracts) Ltd serves as a timely warning to employers that workers will demand voluntary dismissal even though they have tried to settle their differences in a grievance process. Employees that participate in an arbitration process or file an appeal do not automatically confirm their work arrangement and revoke their ability to demand constructive dismissal. Every case will turn on its own merits, but there is a strong possibility that grievance or appeal clauses will stay in effect even though workers believe their work contract has been terminated due to a violation. Employers can handle staff grievances in compliance with their rules and practices at all times. Employees, on the other hand, can continue to use grievance or disciplinary procedures after a violation of their employment contract has occurred without fear of losing their right to claim constructive dismissal. During the arbitration or disciplinary process, employees should take care not to behave in a manner that suggests they have acknowledged or waived the employer's repudiatory violation in any other way.