What is an anticipatory breach?

DIANA MAHABIR-WYATT

An interesting case arose recently in which a management employee claimed constructive dismissal before any dismissal took place.

It rested in what contract law refers to as an anticipatory breach, in which the employee assumes he is going to be wrongfully dismissed, so he resigns and then claims that he was forced to resign, because the employer was going to dismiss him without cause.

In the instant case, the employee, having completed satisfactorily the six-month probationary period as a new manager in an HR department of a finance organisation, began to complain about the way he was being treated by his CEO, who did not agree with his opinions or how and when to negotiate contracts.

The employee was a recent mature law graduate from the UK, near the top of his class. He intended to apply for a scholarship to the London School of Economics to do an advanced degree in international relations law and eventually join a UN agency, of which he made no secret.

Not understanding the difference between practical industrial relations (IR) and contract law – assuming, as so many law graduates do, that there is no difference – once his probationary period ended, he began to operate on that assumption.

As an observant Republic Bank manager explained to a gathering of graduating students recently, “Passing exams does not alone qualify you for entry into a management position. You have to ascend through the fire of effective experience first.” Or wise words to that effect.

Recent huge civil-court awards for unfair dismissal or wrongful dismissal (yes, Virginia, there is a difference) in the TTPS and the Central Bank may have encouraged his expectations and hence his actions.

The distinction between applying for a scholarship and getting the scholarship had eluded him.

As often happens in the private sector, his co-operative relationship with his managers and the CEO began to change post-probation. It changed from oral disagreements over the extent of his authority to making decisions based on his assumption of a level of authority he did not have, then to active implementation of those wrongfully assumed authorities, in less than six months.

Among those decisions were entering into contracts for purchasing goods and contracting services, recruiting professional staff without prior agreement and, in two instances, without subsequent knowledge from the managing director or the board. He was also charged with breaching his fiduciary duties knowingly and willingly, which – as was stated in the statement of case eventually made against him – included but were not limited to duties of care and skill, good faith, loyalty, conflicts of interest and the safeguard of property.

That language alone will indicate to HR professionals that the case, in his instance, after repeated warnings that he was indulging in flagrant misconduct, resulted in his suspension from employment.

Meanwhile, an in-company tribunal made up of three experienced board directors was established, met and by what is commonly known as good IR practice held sessions at which he was asked why, in the case of each of the charges against him and examples on which they were based, he had done what he had done.

Not wanting to have a “dismissal for cause” record on his employment record, he “took in front before in front took him,” and told his manager he was taking up a better-paying position, cleared his desk and walked out.

He did not at any time claim that his employer had not provided any contractual term, benefit or duty owed to him.

The company, bound by policy and protocol, instructed the three directors to go on with their investigation and they did, even inviting the employee to return and complete giving them the reasons for his actions, in a response that opened the door for him to bring a suit against them for wrongful dismissal.

In the UK, at employment tribunals set up by the equivalent of our labour ministry, it is accepted that an employer’s breach of any of the terms of an employee’s contract, including the contract of a management employee, can constitute constructive dismissal, and this can sometimes occur before the employee is formally terminated, but not unless the employee can prove the employer’s actions constitute so important a breach that it entitles him to resign.

In this case, the matter is made more complex by his "firing his own job," but apparently in the UK, this does not preclude him from taking up the charge he did.

In his claim against the company, the employee argued his contract was so worded that it gave him the authority to take action in legal matters without having to go back to seek approval over "every little aspect of his work,” which would impede him in the efficient carrying out of his responsibilities. He was the sole manager qualified in or capable of understanding the law, he argued, and the CEO’s labelling his actions gross misconduct was false and contrary to contract law, in which he was an expert.

The board, as it had promised to do, listened courteously and intently, thanked him for his explanation, decided to make its recommendation based on good IR practices and issued him a letter accepting his resignation.