Mutuality of Contract Does Not Preclude Constructive Dismissal

Case: McNeill v. Aberdeen City Council (No 2) ([2015] ICR 27)

Court: Scottish Court of Session

Date: 28 November 2013

Introduction

The case of McNeill v. Aberdeen City Council (No 2) revolves around the complexities of constructive dismissal within the framework of Scots contract law. The appellant, Tom McNeill, employed by Aberdeen City Council for 21 years, resigned in 2006, claiming that the manner in which his employer conducted disciplinary investigations constituted a breach of the implied duty of mutual trust and confidence. This breach, he argued, entitled him to resign without notice, thereby amounting to a constructive dismissal. The primary legal contention was whether the Scottish doctrine of mutuality of contractual obligations negated his claim for constructive dismissal.

Summary of the Judgment

The Scottish Court of Session, after thorough deliberation, upheld the decision of the Employment Tribunal in favor of Tom McNeill. The Court rejected the Employment Appeal Tribunal's reliance on the doctrine of mutuality of contractual obligations as a barrier to McNeill's claim. It was determined that the respondents' conduct indeed breached the implied term of mutual trust and confidence, justifying McNeill's resignation as a constructive dismissal. Consequently, the Court restored the Employment Tribunal's original decision, emphasizing that mutuality of contract does not shield employers from breaches that fundamentally undermine the employment relationship.

Analysis

Precedents Cited

The judgment extensively referenced key precedents to elucidate the legal principles underpinning constructive dismissal. Notably:

• Malik v BCCI [1998] AC 20: Established the implied term of mutual trust and confidence in employment contracts.
• Western Excavating (E.C.C.) Ltd v Sharp [1978] QB 761: Distinguished between the contract test and the unreasonableness test for constructive dismissal.
• Gisda Cyf v Barrett [2010] ICR 1475: Emphasized an interpretation of employment provisions that favors employee rights.

These cases collectively informed the Court's interpretation of section 95(1)(c) of the Employment Rights Act 1996, reinforcing that the employer's conduct must be assessed under the proper law of the contract, which in this case is Scots law.

Legal Reasoning

The Court delved into the nature of constructive dismissal, emphasizing that section 95(1)(c) allows an employee to terminate the contract without notice if the employer's conduct fundamentally breaches the contractual obligations. Central to this reasoning was the principle of mutuality of contractual obligations, a cornerstone of Scots contract law, which posits that both employer and employee are bound by reciprocal duties.

However, the Court clarified that mutuality does not negate an employee's right to terminate the contract if the employer's actions sufficiently undermine the employment relationship. The assessment focused on whether the employer's behavior breached the implied duty of trust and confidence, rather than solely on mutual obligations.

Impact

This judgment has significant implications for employment law in Scotland. It delineates the boundaries of mutuality of contract, affirming that employers cannot circumvent their duties by invoking mutual obligations if their conduct constitutes a material breach. Consequently, employees have strengthened grounds to claim constructive dismissal when facing unjust employer behavior, ensuring better protection against unfair treatment in the workplace.

Complex Concepts Simplified

Constructive Dismissal: Occurs when an employee resigns due to the employer's behavior, which effectively forces the employee to leave.

Mutuality of Contract: A principle in Scots law where both employer and employee have reciprocal obligations; a breach by one party affects the duties of the other.

Implied Term of Trust and Confidence: An unwritten obligation that both parties in an employment contract must not act in a way that damages the mutual trust essential for the employment relationship.

Section 95(1)(c) of the Employment Rights Act 1996: A statutory provision that defines circumstances under which an employee can be considered dismissed by the employer, including when the employee terminates the contract due to the employer's conduct.

Conclusion

The Court of Session's decision in McNeill v. Aberdeen City Council (No 2) reaffirms the sanctity of the implied duty of mutual trust and confidence within employment contracts under Scots law. By rejecting the notion that mutuality of contract can shield employers from liability in cases of fundamental breaches, the judgment empowers employees to resign constructively when faced with unjust and damaging conduct. This advancement ensures a more equitable balance in employer-employee relations, promoting fair treatment and accountability in the workplace.