Mruke v Khan

The Court of Appeal considered two issues arising from Employment Tribunal findings: direct racial discrimination under the Race Relations Act 1976 and constructive unfair dismissal under the Employment Rights Act 1996. The court held that the Employment Tribunal correctly rejected the claim of direct racial discrimination because the less favourable treatment proved was attributable to the claimant's socio-economic circumstances rather than her nationality or national origins, and the comparator analysis required by section 3(4) and the burden-shifting rule in section 54A were correctly applied. By contrast, the court found that the Tribunal erred in law by treating the claimant's lack of knowledge of her statutory entitlement to the national minimum wage as fatal to a claim of constructive dismissal. The Court of Appeal concluded that the failure to pay the national minimum wage imported an implied contractual term (by operation of statute) and could found a repudiatory breach; the Tribunal's contrary approach was an error of law and its factual conclusion that resignation was not in response to that breach was perverse. The court therefore allowed the unfair dismissal appeal and substituted its own finding that the claimant was unfairly dismissed.

Background and parties:

• The claimant (Ms Mruke), a Tanzanian national recruited to work as a domestic worker, brought claims to the Employment Tribunal for unlawful deduction from wages (including failure to pay the national minimum wage), unpaid holiday pay, failure to provide rest breaks and accommodation issues, as well as claims of direct and indirect racial discrimination and constructive unfair dismissal.
• The respondent (Ms Khan) was the claimant’s former employer. Proceedings were long delayed in part because of related criminal proceedings; the respondent did not take part in the Court of Appeal hearing.

Procedural history:

• The Employment Tribunal (ET) issued a decision sent on 28 February 2013: it upheld the claimant’s wage-related claims and some other statutory entitlements, but dismissed direct and indirect race discrimination and constructive dismissal/unfair dismissal claims.
• The claimant appealed to the Employment Appeal Tribunal (EAT); some appeals were dismissed at preliminary stage (27 March 2014) while the EAT allowed the unfair dismissal appeal to proceed to a full hearing. A substantive EAT hearing on unfair dismissal was held on 25 July 2014 and the claimant’s unfair dismissal appeal was dismissed.
• The claimant obtained permission to appeal to the Court of Appeal, with permission renewed or granted in stages (10 December 2015; 21 November 2016). The Court of Appeal heard the appeals and delivered judgment on 23 February 2018.

Nature of the claims and relief sought:

• The claimant sought remedies for unlawful deductions from wages (including arrears to reach the national minimum wage), unpaid holiday pay and other statutory entitlements, declarations and remedies for race discrimination under the Race Relations Act 1976, and remedies for unfair dismissal (constructive dismissal) under the Employment Rights Act 1996.

Issues framed and decided by the Court:

1. Whether the ET erred in law in its comparator analysis and in applying the burden of proof under section 54A of the Race Relations Act 1976 in relation to the direct racial discrimination claim.
2. Whether the ET erred in law and/or reached a perverse factual conclusion in relation to constructive dismissal, in particular whether the claimant needed to know of her statutory entitlement to the national minimum wage in order to resign in response to a repudiatory breach.

Court’s reasoning and conclusions:

• On direct discrimination the court accepted the ET’s approach that the appropriate comparator had to be someone in materially the same circumstances; the ET’s characterization of the hypothetical comparator (sharing the claimant’s socio-economic characteristics) was lawful and led to the conclusion that the less favourable treatment proved was not shown to have been because of nationality or national origins. The court considered and applied authorities on the meaning of "grounds" and the comparator exercise and found no error of law in the ET’s reasoning; the EAT’s dismissal of the discrimination appeal was therefore upheld.
• On constructive dismissal the court held that the National Minimum Wage Act 1998 operates to imply a statutory contractual entitlement to the national minimum wage, and breach of that implied term can be repudiatory. The ET’s requirement that the claimant must have known of that entitlement before her resignation was an error of law. Further, on the facts the ET’s conclusion that the claimant did not resign in response to the breach was, in the court’s view, perverse given the egregiously low pay (the equivalent of pence per hour). The Court of Appeal therefore allowed the unfair dismissal appeal and substituted its own finding that the claimant was unfairly dismissed rather than remitting the matter.

The appeal was allowed in part. The Court of Appeal dismissed the appeal against the EAT's decision on direct racial discrimination but allowed the appeal against the EAT's dismissal of the unfair dismissal (constructive dismissal) claim. The court reasoned that the ET had not erred in its comparator or burden-of-proof analysis on discrimination, but had erred in law and reached a perverse factual conclusion on constructive dismissal by treating the claimant’s ignorance of her statutory entitlement as fatal; the court substituted its own finding that the claimant was unfairly dismissed.

Employment Tribunal (Watford) decision sent 28 February 2013; preliminary EAT disposition 27 March 2014 (dismissed discrimination appeals but permitted unfair dismissal appeal to proceed); substantive EAT hearing on unfair dismissal 25 July 2014 (appeal dismissed); permission to appeal to the Court of Appeal granted in stages (notably 10 December 2015 and 21 November 2016); Court of Appeal judgment [2018] EWCA Civ 280 (23 February 2018). Also relevant: Supreme Court decision in Onu and Taiwo ([2016] UKSC 31) considered in the appellate proceedings.