Reasonable and proper cause for breaching the duty of trust and confidence

by Laurie Anstis on October 11, 2011

“the employer shall not . . . without reasonable and proper cause, conduct itself in a manner calculated [or] likely to destroy or seriously damage the relationship of confidence and trust between employer and employee.” 

 

Lord Steyn’s description of the “duty of trust and confidence” in Malik v BCCI is one of the most significant judicial statements in employment law. It has particular importance in claims based on a constructive dismissal, in which an employee will often allege that their employer has breached the duty of trust and confidence.

The reference to “reasonable and proper cause” suggests that there will be cases in which the employer has conducted itself in a way that would seriously damage trust and confidence, but which do not amount to a breach of the duty of trust and confidence because there is “reasonable and proper cause” for the conduct. This was Lord Steyn’s understanding, as he went on to say:

“… the implied … obligation of trust and confidence applies only where there is no ‘reasonable and proper cause’ for the employer’s conduct” 

 

 

The significance of this came to be considered in the case of The Hira Company v Daly.

In that case, the tribunal found that the claimant’s position as a sales person within his employer had been undermined when his employer (1) supplied faulty goods to his customers, (2) diverted goods due to his customers to another customer and (3) re-assigned a valuable account to another salesperson. Each of those problems had affected the employee’s ability to earn commission.

Having found that, the employment judge found that there were good reasons for the what had happened. The supply of faulty goods was the fault of a third party supplier, not the employer. The goods were diverted so at to avoid paying a penalty to another customer, and the account was re-assigned only when the customer expressed a preference for dealing with the other salesperson. The employment judge went on to say, “Could it be said that there were no reasonable and proper causes for the employer’s conduct. I do not think so.” and found that there was no breach of the duty of trust and confidence.

The employment judge was outvoted by the non-legal members on the tribunal panel, who found that the employer’s behaviour did amount to a breach of the duty of trust and confidence.

The employer appealled to the Employment Appeal Tribunal, who summarised the difference as follows (paragraph 19):

“[The employment judge’s] view was that none of the matters raised, whether taken in isolation or together, amounted to a breach of the implied term of trust and confidence because there were sound business reasons for what had been done, none of which had been maliciously or capriciously directed at the [employee] personally. The lay members took the view that there were an accumulation of matters, which had an adverse effect on the [employee’s] earnings and therefore amounted to a fundamental breach of the duty of trust and confidence.”

 

In the Employment Appeal Tribunal, Judge Hand QC emphasised that assessment of a breach of the duty of trust and confidence was an objective matter, considered Buckland v Bournemouth University, and held that it was an “unvarnished” Malik test (a phrase taken from the Employment Appeal Tribunal’s decision in Buckland) that should be applied by the tribunal. This “unvarnished” test did not include “an analysis of the employer’s reasons and motives“, and “‘reasonable and proper cause’ is not to be judged by placing the employer’s reasons for his conduct in a spectrum of such reasons”. The EAT found that it was the non-legal members, rather than the employment judge, who had applied this “unvarnished” test, and that it was their reasoning that was correct in this case. There had been a breach of the duty of trust and confidence, despite the explanations that the employer had given.

After Buckland and this case, my question is whether “reasonable and proper cause” actually adds anything to the duty of trust and confidence? The tribunal has to assess, on an objective basis, whether the employer has conducted itself in a way calculated or likely to destroy the relationship of confidence and trust between and employee and employer.

What, if anything, does the concept of “reasonable and proper cause” add to this?

(My attention was drawn to this case by this post from 11KBW.)

3 comments

Those words add nothing it seems if Buckland is good law (which doesn’t seem to be in doubt), and providing for an objective assessment only of the reasons for the breakdown of the employment relationship must make the decision process simpler. In this case though it looks like a harsh outcome on the employer.

by Michael Scutt on 12 October 2011 at 2:22 pm. #

If I am interpreting this correctly, then 1)the effects on the employee caused by the employer’s actions is more important than 2)the employer’s reasons for having breached the duty of trust and confidence.

by Joel Salomon on 17 October 2011 at 5:06 pm. #

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