Mostyn v S and P Casuals Ltd

A unilateral imposition of a substantial reduction in contractual salary is a repudiatory breach of an important express term. Where that conduct is also relied on as a breach of the implied term of mutual trust and confidence, an Employment Tribunal must not ask whether the employer had reasonable and proper cause for repudiating the contract. The question whether the employer acted reasonably does not determine whether a fundamental breach occurred.

The statutory fairness inquiry under section 98(4) of the Employment Rights Act 1996 is separate. It requires the Tribunal to decide whether the employer reasonably treated the asserted reason, such as capability, as sufficient reason for dismissal.

The Claimant resigned after the Respondent stated that it would impose a change to his remuneration package. His basic salary was to reduce substantially, with a revised commission arrangement. The Employment Tribunal dismissed his claims for constructive unfair dismissal and wrongful dismissal. It found that the proposed pay change was likely to damage trust and confidence, but held that the Respondent had reasonable and proper cause for its conduct.

The Tribunal also held conditionally that, if there had been a dismissal, it would have been fair for capability reasons. The Claimant appealed. The central issues were whether the Tribunal could treat the employer's asserted justification as preventing a repudiatory breach, and whether its conditional finding on fairness applied the correct statutory inquiry.

1. Appeal allowed. The Employment Appeal Tribunal held that the Claimant had been constructively and wrongfully dismissed. The threatened unilateral imposition of a substantial pay cut was a repudiatory breach of the contractual salary term, and the Claimant resigned in response to it.

2. The Claimant had pleaded reliance on the threatened salary reduction. Although his case before the Employment Tribunal was framed through the implied term of mutual trust and confidence, conduct may breach an express term while also supporting reliance on that implied term. The Tribunal was therefore required to address the contractual significance of the salary reduction.

3. Applying the objective contractual approach confirmed in Buckland v Bournemouth University Higher Education Corporation [2010] EWCA Civ 121, the question whether conduct amounts to a repudiation does not depend on whether the employer acted reasonably. On the facts found, there was only one legal answer: the proposed unilateral and significant reduction in contractual pay repudiated the contract. No employer can have reasonable and proper cause for repudiating the contract in that way.

4. The Employment Tribunal's alternative finding of fairness could not stand. Its reasoning conflated the question whether the employer had reasonable and proper cause for the repudiatory conduct with the distinct inquiry under section 98(4) of the Employment Rights Act 1996: whether the employer reasonably treated capability as a sufficient reason for dismissal. Its finding was also difficult to reconcile with its conclusion that the capability process had barely begun.

5. The issue of unfair dismissal was remitted to a differently constituted Employment Tribunal. The remitted Tribunal was directed to proceed on the existing factual findings, apart from those on repudiation and fairness, the documents already before the Tribunal, and the parties' submissions.

• Employment Appeal Tribunal: Allowed the Claimant's appeal in [2018] UKEAT 0158_17_2202. It set aside the finding that there was no dismissal and the conditional finding that any dismissal was fair. The unfair-dismissal issue was remitted to a differently constituted Employment Tribunal.
• Employment Tribunal, Nottingham: Decision sent to the parties on 3 February 2017. It dismissed claims including constructive unfair dismissal and wrongful dismissal. No citation for that decision is stated in the judgment.