Constructive Dismissal: Refusal to pay contractual sick pay was a fundamental breach of contract

Published 15 julio 2022

The EAT held that an employer’s actions in withholding contractual sick pay where it believed that an employee was off sick in an attempt to avoid a disciplinary meeting amounted to a fundamental breach of contract.

THE FACTS

Mr Singh was employed by Metroline West Limited.   He was invited to a disciplinary hearing and the next day went off on sick leave.  He attended an occupational health appointment and  the OH advisor did not suggest that his sickness was not genuine.  Believing that that Mr Singh’s sickness absence was not genuine but an attempt to avoid the disciplinary meeting, Metroline decided to pay Mr Singh statutory sick pay rather than contractual sick pay.    Based on the failure to pay contractual sick pay and on allegations that his manager had been aggressive when arranging the disciplinary hearing, Mr Singh claimed that he had been constructively dismissed. 

The employment tribunal found that Mr Singh’s manager had not been aggressive but that the failure to pay contractual sick pay was a breach of contract. However, the tribunal did not consider that this was a fundamental breach of contract because, by withholding pay, Metroline had not indicated an intention not to be bound by the employment relationship: rather, its aim in withholding pay had been to encourage Mr Singh to participate in the disciplinary process, and this was integral to the employment relationship.  Mr Singh’s claim was dismissed, and Mr Singh appealed to the EAT.

The EAT allowed the appeal, holding that it was an error of law for the tribunal to adopt the approach that, for the breach of contract to be fundamental, there must have been an intention by the employer not to be bound by the contract in a manner that meant that it no longer wished to continue with the employment relationship. The test for constructive dismissal is that the employer demonstrates an intention to no longer comply with the terms of the contract that is so serious that it goes to the root of the contract.  In this case, there was a deliberate decision to withhold pay to which Mr Singh was contractually entitled, although the contract included other ways of dealing with suspicions of malingering. The employer’s actions constituted a fundamental breach of contract.

WHAT DOES THIS MEAN FOR EMPLOYERS?

Employers should not withhold sick pay where they have an unsubstantiated belief that an employee is malingering.  Employers who suspect employees of being dishonest about sickness absence should investigate and, if they have evidence of malingering, follow proper disciplinary procedures.  Pay should only be withheld if the employer has sufficient evidence and a specific contractual right to do so.

Mr Parbhjot Singh v Metroline West Limited