Disagreement Over Pay and Terms: No Breach of Trust and Confidence

An employer who dismissed an employee as a result of a disagreement over the terms of his contract could not rely on some other substantial reason for dismissal (SOSR) on the basis that trust and confidence had broken down.  The dismissal was therefore unfair.

In Handshake Ltd v Summers S had been employed as a senior manager since 2003.  From 2006 onwards, his employer sought to formalise the terms of his employment and prepared various drafts of a service agreement which were never agreed.  The matter became contentious and S’s solicitors wrote to his employer saying that S had lost all trust and confidence in the employer.  Negotiations continued unsuccessfully and six weeks later S was dismissed due to a breakdown in the working relationship.  S claimed unfair dismissal.

The employment tribunal found that S had not been dismissed due to a loss of trust and confidence but due to a power struggle over the terms of the contract. The EAT agreed.  The relationship of trust and confidence had not broken down at the point of dismissal.  An employee does not act in breach of the duty to maintain trust and confidence merely by opening up a debate about the terms of his employment.  Although the way in which the debate is conducted may lead to a breach, the tribunal had not identified anything in the way the debate was conducted which indicated that trust and confidence had evaporated.   The tribunal had therefore been entitled to find that the reason for dismissal advanced by the employer was not the true reason for dismissal.  The dismissal was therefore unfair.

This case once again highlights the difficulties for employer of seeking to rely on loss of trust and confidence as a reason for dismissal.  Relying on the loss of trust and confidence alone will not usually be enough to establish a fair reason for dismissal and the focus should be on the surrounding circumstances and conduct which led to the alleged breakdown.  Here, a disagreement over contractual terms was not in itself a sufficient reason for dismissal and there was nothing in the surrounding circumstances, in particular the manner in which the debate had been conducted, which gave the employer a fair reason for dismissal.