Employer's false explanation that the reason for dismissal was reorganisation, when it was poor performance, breached the implied term of trust and confidence.

The facts

Mr Rawlinson was employed as Brightside Group's new Group Legal Counsel. Concerns about his capability were identified very early on but nothing was raised with him. Within four months it was decided that Mr Rawlinson's position was untenable, but to "soften the blow" he was simply told that the company had decided to outsource its legal services because the current arrangements were not working. He was given his contractual three months' notice, and asked to keep working to ensure a smooth handover. However, Mr Rawlinson became suspicious and resigned with immediate effect claiming constructive dismissal as well as taking the view that this must be a TUPE transfer and his employer should at least have informed him of the name of the firm to whom the services were being outsourced. He brought claims in the employment tribunal for breach of the duty to inform and consult under TUPE and wrongful constructive dismissal based upon a fundamental breach of the implied term of trust and confidence, arguing there is a duty on employers to be honest and not to mislead. In the meantime he discovered the real reason for his dismissal by making a data subject access request.

The employment tribunal rejected his claims: there was no relevant transfer for TUPE purposes, and the company's failure to forewarn Mr Rawlinson of performance concerns was not a breach of trust and confidence because was there was no obligation on the company to provide the information to him. The employment tribunal also considered that his complaint was more about the manner of his dismissal for which damages cannot be awarded in a breach of contract claim. Mr Rawlinson appealed to the EAT who upheld his wrongful dismissal claim.

The EAT had little difficulty in finding that in all but the most unusual cases, the implied term means an employer must not deliberately mislead an employee, even if the motivation for doing so is to soften the blow. It does not constitute a broader obligation to volunteer information, but where a reason for termination is given, it must be done in good faith. The EAT did acknowledge that there may be particular cases in which the operation of the implied term would permit an element of deceit (“the white lie that serves some more benign purpose”) but this was not so in this case. Furthermore, the EAT found that Mr Rawlinson's complaint did not relate to the dismissal, but to the falsehood told to him with a view to keeping the relationship alive during the notice period. His response to the communication of an untrue reason for his dismissal was to walk out, giving rise to his loss over the notice period, and he could be compensated for that.

What does this mean for employers?

Dressing up a performance dismissal to soften the blow for an employee may be attractive for managers, but this case is a reminder that this approach should be avoided. It is better to say nothing than to mislead. Here a senior employee who could have been dismissed following a failure to pass his probationary period was effectively given a breach of contract claim because he was misled about the reason for his dismissal. It is also a warning that a lack of honesty could lead to employees on significant contractual packages obtaining compensation regardless of the fact they do not have the service to bring an unfair dismissal claim.

This case gives employers even more reason to train line managers, to regularly manage performance through 1:1 processes and, where performance is not up to scratch, have the, sometimes difficult, conversation about under-performance.

Rawlinson v Brightside Group Ltd