Employers sometimes cite a breakdown in trust and confidence as a justification for termination of employment where the surrounding circumstances cannot easily be fitted within one of the main potentially fair reasons for dismissal – conduct, capability or redundancy. In a recent case the EAT has emphasised that more is required than a simple assertion that trust and confidence has been lost. The case concerned an employee who had been offered 30% of the issued share capital of the company on joining. In the event the shares were not transferred to him but in two successive years he was given a bonus of 30% of the company’s net profits.
Over a period of about 3 years, the employer tried to formalise the terms of the individual’s employment and various draft agreements were prepared. In the event no agreement was reached. The situation became somewhat strained when a dispute arose over the calculation of the profit share and a solicitor wrote to the employer on behalf of the individual, referring to a possible constructive dismissal claim. Some 6 weeks later the individual was dismissed. The dismissal letter referred to a breakdown in the working relationship and alleged that the individual was not as committed as he had been. The individual claimed that the dismissal was unfair. The employer argued that the alleged breakdown in the working relationship amounted to some other substantial reason and was sufficient to make the dismissal fair.
The EAT agreed that the dismissal was unfair. They accepted that neither side had behaved as though the working relationship had broken down. The fact that a debate had been opened up about the terms of the individual’s employment did not destroy trust and confidence and neither did the manner in which the debate was conducted. The case is a useful reminder that an alleged breakdown in trust and confidence is not just a convenient label to be used as the reason for a dismissal which cannot otherwise be justified. A breakdown in negotiations or failure to agree terms about pay is not by itself a basis for saying that the entire working relationship has broken down and will not normally justify dismissal.