Is implied term of mutual trust and confidence in employment contracts always breached in discrimination cases?

Perhaps? Not necessarily? What do employees have to show in their claims?

Employers not only have to uphold the express, written terms of the contracts they have in place with their employees – as well as the myriad of statutory rights they need to comply with – but there is the implied term of mutual trust and confidence.

What is an implied term of mutual trust and confidence?

The implied term of mutual trust and confidence is a term impliedly written into every employment contract in the UK, meaning it is assumed to exist even if not explicitly written. This term requires both employers and employees to behave in a way that does not undermine their working relationship. A breach by the employer of trust and confidence, by intentionally or recklessly engaging in conduct that damages the fundamental relationship of mutual trust and confidence can lead to serious consequences, including constructive dismissal claims by employees, which can be extremely expensive for employers to defend at an Employment Tribunal (ET).

A breach of trust and confidence can justify the termination of the employment relationship by the employee or the employer, when the other is responsible for the breach of mutual trust and confidence.

Examples of a breach of the implied term by employers include:

• Failing to follow statutory obligations or policies
• Acting in a way that undermines an employee’s position or reputation
• Harassment, bullying, or discrimination
• Negative comments about the employee
• Unilateral changes to employment terms.

Examples of a breach by employees include:

• Dishonesty or theft
• Gross misconduct
• Breach of confidentiality.

If an employer breaches the duty, an employee may resign and claim constructive dismissal which can result in the employer having to pay loss of earnings and potentially other damages to the former employee. The case below demonstrates the importance of the implied term of mutual trust and confidence and the repercussions if the employer breaches it, when engaging in discrimination by reason of a protected characteristic, in this case disability, due to a diagnosis of and treatment for breast cancer.

Wainwright v Cennox (2023) EAT 101

In this case, Ms Wainwright resigned from her job role, following sick leave after being treated for breast cancer, after finding out her employer had appointed another employee to take over her role. Ms Wainwright was told that the new employee was only in a temporary position due to her sick leave, but this was misleading. In fact the new employee was in a permanent role to replace her. Following her grievance, which was delayed and ultimately unresolved, and her resignation, Ms Wainwright claimed 1) constructive unfair dismissal, 2) discrimination arising from a disability and 3) direct disability discrimination (involving a comparator who was not disabled).

The ET found that appointing someone else to the same role as Ms Wainwright, and effectively lying to her about it, amounted to discrimination arising from her disability, but that the dismissal was not directly discriminatory in nature (not less favourable compared to a suitable comparator). The ET also decided that her perception of loss of status was mistaken and that Cennox was not in repudiatory breach of her employment contract, so that her resignation did not amount to constructive dismissal.

Ms Wainwright appealed and the Employment Appeal Tribunal (EAT) partially upheld her appeal. It decided that the ET failed to consider whether the discriminatory actions might also have been fundamental breaches of contract – specifically, breaches of the implied term of mutual trust and confidence. The ET should have undertaken a structured approach to her constructive dismissal claim, asking itself:

• Whether the acts were repudiatory breaches
• Whether Ms Wainwright affirmed the breach of contract
• Whether those breaches materially contributed to her decision to resign.

The EAT said that it was wrong for the ET to assume that her “erroneous perception of status” ruled out any role for discrimination in her resignation. Multiple factors can contribute; they should not be mutually exclusive. The EAT remitted the case to a differently constituted ET to reconsider the constructive dismissal and discriminatory dismissal claims.

So back to our question: Is implied term of mutual trust and confidence in employment contracts always breached in discrimination cases?

It is likely that a breach of equality law by an employer will amount to a breach of the implied term of mutual trust and confidence entitling the employee to:

• Accept the breaches as repudiatory breaches, entitling them to resign
• Not affirm the breach of contract
• Resign in response to or mainly because of those breaches.

So where an employee takes out a grievance on grounds of discriminatory treatment, this can be used as evidence of a breach of the fundamental implied trust and confidence term.

If your business is facing a grievance by an employee alleging breach of contract and discrimination, and you need specialist legal support, please do not hesitate to contact us.