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Would I lie to you?

Meredith Hurst Wednesday, March 7, 2018

The implied duty of mutual trust and confidence in the employment relationship provides employer and employee with a potential opportunity to challenge pretty much any behaviour - although whether the challenge will be successful is another matter. In a recent case, the not unusual scenario of employer lying about reason for dismissal was put into the spotlight.

Duty of trust and confidence

Employers have a common law implied duty of trust and confidence to their employees. It's a fundamental duty, and an employee who succeeds in proving a breach can claim compensation. This right was confirmed by the House of Lords in the case of Malik v Bank of Credit and Commerce International SA (In Liquidation)[1998] AC 20:

"The employer must not, without reasonable and proper cause, conduct itself in a manner calculated and likely to destroy or seriously damage the relationship of trust and confidence between employer and employee" (Lord Steyn).

If an employer breaches their duty of trust and confidence, it may give rise to a compensation claim. In the recent case of Rawlinson v Brightside Group Ltd  UKEAT/0142/17/DA, an unusual claim was made against an employer for lying about the reasons for a dismissal.

The facts of Rawlinson v Brightside Group

Brightside Group, an insurance broking business, decided to dismiss Mr Rawlinson, one of its employees, based on his performance. Mr Rawlinson worked in their legal service department. Instead of being honest with Mr Rawlinson, his employer told him hat he was going to be dismissed because the company had decided to outsource legal services. This approach was taken to "soften the blow" of the dismissal, and because Brightside Group wanted to keep Mr Rawlinson for the three-month notice period to allow time to make arrangements for a suitable replacement.

Under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) regulations 13, 15 and 16, employers have a duty to inform and consult their employees of a relevant transfer of their service. Mr Rawlinson resigned and said he would not be working his three-month notice, based on his belief that Brightside Group had violated TUPE and that he therefore had a case for unlawful dismissal. Mr Rawlinson further believed Brightside Group had failed to meet the requirements of consultation regarding redundancy under sections 188 and 189 Trade Union and Labour Relations (Consolidation) Act 1992.

He incorrectly believed that he had been denied these statutory rights because Brightside Group had misled him about the reasons for his dismissal. Mr Rawlinson made a subject access request and discovered that the real reason for his dismissal was his performance.

The Employment Tribunal ruled against Mr Rawlinson on the basis that his statutory claims were invalid; TUPE did not apply because the reason for his dismissal was not due to the outsourcing of legal services. It was also held that Brightside Group was not contractually obligated to give him reasons for dismissal, and that Brightside Group had not therefore conducted itself in such a manner as to breach the relationship of trust and confidence with Mr Rawlinson. Mr Rawlinson appealed the decision to the Employment Appeal Tribunal.

Too much focus on the strict legal obligation

On appeal, it was found that the Employment Tribunal had failed by focussing too much on Brightside Group's lack of obligation to give reasons for the dismissal. Even though Brightside Group did not have anobligationto give Mr Rawlinson reasons, theywerein breach of the duty of trust and confidence because they had lied to him. In a situation where an employer does not have to give reasons for a dismissal, should it choose to give reasons nonetheless, those given must not be misleading or untrue.

The argument that Brightside Group had acted in good faith by telling Mr Rawlinson he was being dismissed due to legal outsourcing was not enough to absolve them of any wrongdoing: Brightside Group had sought to "soften the blow" out of a desire to keep him until they could find a suitable replacement. This strategy backfired when Mr Rawlinson resigned, as he wrongly believed his statutory rights were breached in relation to outsourcing.

In or out of the 'Johnson Exclusion Zone'?

In the case of Johnson v Unisys Ltd [2001] IRLR 279 HL, it was established that there are limits on common law remedies for breach of an employment contract, when the only loss suffered results from the manner of the dismissal itself. This is because unfair dismissal is covered separately under statute. Therefore, there must be a limit to which employment claims can be made under the common law.

This principle was further defined in Eastwood and Anor v Magnox Electric plc, McCabe v Cornwall County Council  [2004] IRLR 733 HL, as the "Johnson Exclusion Zone".  If an employee is treated unfairly in the manner in which they are dismissed, this will fall within the Johnson Exclusion Zone and they can only pursue a statutory claim for unfair dismissal. However, Lord Nicholls also explained:

 "If before his dismissal, whether actual or constructive, an employee has acquired a cause of action at law, for breach of contract or otherwise, that cause of action remains unimpaired by his subsequent unfair dismissal and the statutory rights flowing therefrom. By definition, in law such a cause of action exists independently of the dismissal."

This statement means that if an employee suffers loss as a result of a breach of contract before they are dismissed, they will have a cause of action for common law breach of contract separate to a claim of unfair dismissal, and will not fall within the Johnson Exclusion Zone.

Did Mr Rawlinson's claim fall within the Johnson Exclusion zone? 

Brightside Group told Mr Rawlinson that he was going to be dismissed, and gave him an untrue reason. Mr Rawlinson argued that this caused him a loss separate to an unfair dismissal claim: the claim for breach of contract did not fall within the Johnson Exclusion Zone. The judge emphasised the complicated nature of the situation, and decided that the common law claim should be allowed because Brightside Group's conduct occurred when the employment relationship was intended to continue, not as part of a dismissal. Therefore the claim could be made outside the Johnson Exclusion Zone.

Brightside Group had assumed a responsibility not to mislead Mr Rawlinson by deciding to give him a reason for his upcoming dismissal and therefore breached the common law duty of trust and confidence separate to the unfair dismissal claim under statute. The judge reversed the decision of the Employment Tribunal and ruled in Mr Rawlinson's favour.

'Softening the blow' is not the answer!

Employers are not always under a legal obligation to give reasons for dismissal. However, it is possible to make a claim against an employer if a misleading reason is given. Deciding to give a reason makes it important for employers to be honest and follow procedures. If an employer attempts to "soften the blow" by being untruthful about the reasons for a dismissal, this can lead to unintended consequences such as Mr Rawlinson's resignation. Notably, Mr Rawlinson found out about the reasons behind the dismissal through a subject access request, so lying about the reasons for dismissal is not a viable strategy for an employer.