SW Global Resourcing Limited v Docherty & Anor

An employer may establish some other substantial reason for dismissal where it imposes contractual change for genuine, sound and non-arbitrary business reasons. The statutory threshold in section 98(1) is modest and must not be conflated with the subsequent assessment of reasonableness under section 98(4) of the Employment Rights Act 1996.

A fundamental breach of an express contractual term does not itself establish breach of the implied term of trust and confidence. That implied term requires conduct without reasonable and proper cause which is calculated to destroy or seriously damage trust and confidence. A constructive dismissal following such a breach may nevertheless be for a potentially fair reason and may be fair in all the circumstances.

The employer provided welders to the rail industry. In response to recessionary pressures and reduced competitiveness, it proposed to remove the employees’ guaranteed weekly payment and introduce ad hoc arrangements under which it need not offer work or pay when no work was offered.

The employees resigned before the new arrangements took effect and claimed constructive unfair dismissal. The Employment Tribunal held that the proposed terms would remove the mutuality of obligation necessary for employee status. It also held that the dismissals were unfair because there was no potentially fair reason and because there had been no consultation about the consequent change from employee to worker status.

The employer appealed. The central issues were whether the proposed arrangements preserved employee status and whether the dismissals were for some other substantial reason and fair.

1. Appeal allowed. The Employment Tribunal’s decision was set aside. The Employment Appeal Tribunal substituted findings that the claimants had been fairly dismissed and dismissed their claims.
2. The Tribunal was correct that the proposed ad hoc terms would not create an employer–employee relationship. The employer would have had no legal obligation to offer work or to pay the claimants when no work was offered. Its stated moral intention to offer work, and its previous practice, could not supply the basic mutuality of obligation. The arrangements were therefore not contracts of employment.
3. The Tribunal should not have determined an unpleaded allegation that the employer breached the implied term of trust and confidence. The ET1 claims alleged only breach of the express guaranteed-payment term. The allegation was raised only in submissions and had not been explored in evidence.
4. In any event, fundamental breach of the express pay term did not necessarily establish breach of the implied term. The Tribunal had found that withdrawal of the guarantee was prompted by good, sound and non-arbitrary business reasons. That finding meant that the employer had reasonable and proper cause, so a breach of the implied term could not be found.
5. The Tribunal wrongly treated the change in employment status and the supposed implied-term breach as preventing reliance on some other substantial reason. Genuine business reasons for removing the guarantee met the modest threshold in section 98(1)(b) of the Employment Rights Act 1996.
6. The employer had consulted fully and over a lengthy period about the commercial need to reduce costs and remove the guaranteed payment. It could not reasonably have been expected to consult about an unintended legal consequence of which it was unaware. With that erroneous consideration removed, no finding supported unfairness under section 98(4).

• Employment Appeal Tribunal: Allowed the employer’s appeal, set aside the Employment Tribunal’s finding of unfair dismissal, substituted findings of fair dismissal, and dismissed the claims: [2012] UKEAT 0032_11_0805.
• Employment Tribunal, Glasgow: Found the claimants constructively and unfairly dismissed and made monetary awards in their favour. No citation was stated.