Does an employee have to exhaust the grievance procedure before they can claim constructive dismissal?

That was the issue the EAT had to decide in the case of Nelson v Renfrewshire Council.

Facts

Ms Nelson was a learning and support teacher working in a high school. She claimed that the head teacher become angry, raised his voice and pointed at her during a meeting about a work issue. She submitted a grievance alleging that the head had treated her in a ‘threatening, insensitive and aggressive’ way contrary to the local authority's Respect at Work policy. 

The grievance procedure had three stages. Stage one was the grievance. If an employee wasn't satisfied with the initial outcome, they could appeal against the outcome (stage two) and, if they didn't accept the outcome of stage two, they had a further right to appeal (stage three).

The school rejected Ms Nelson's grievance and she appealed. That appeal failed and she was told that she could raise a further appeal under stage three of the policy. 

By that stage, the grievance procedure had been ongoing for eight months. She decided not to exercise her right to make a further appeal on the basis that she had no faith in the system and that contemporaneous witness evidence had been disregarded. The first outcome decision had found that the head had pointed at her and that his actions were experienced by Ms Nelson as aggressive, but because he denied being aggressive, it concluded it was one person's word against another's. The second outcome reached a similar conclusion and rejected her complaint on the basis that both parties had a different perception about what had happened. 

Ms Nelson resigned and claimed constructive dismissal.

The local authority argued that the policy made it clear that ‘employees will normally be expected to exhaust these grievance procedures if they wish to take their grievance to an employment tribunal’ and, because Ms Nelson had decided not to exercise her right to appeal under stage three, she could not succeed with her claim of constructive dismissal.  

Tribunal decision

The tribunal agreed that the head teacher's behaviour was threatening, insensitive and aggressive and did undermine trust and confidence without reasonable and proper cause. But, it said that this incident was not bad enough to seriously damage or destroy the employment relationship between the parties. 

In terms of the grievance procedure, it found that the first investigation wasn't fair or thorough and was, generally, unsatisfactory. The second stage was also inadequate - it hadn't detected or corrected earlier bias and that did damage the implied duty of trust and confidence. However, the tribunal went on to find that there was a reasonable expectation that stage three would be independent, fair and  would have corrected what had gone wrong at the earlier stages. That analysis led it to conclude that the relationship of trust and confidence hadn't been damaged sufficiently to establish constructive dismissal. 

Ms Nelson appealed to the EAT arguing that the tribunal had failed to assess the situation at the point she resigned and had, incorrectly, looked to hypothetical future events.

EAT decision

The EAT agreed that the tribunal had been wrong to explicitly link Ms Nelson's failure to exhaust the grievance procedure with its conclusion that the relationship and not been damaged enough to establish a fundamental breach. What might have happened at a further appeal was ‘irrelevant’ and it referred the matter back to same tribunal to reconsider whether the conduct in question did amount to a repudiatory breach of the implied duty of trust and confidence.

What can other employers learn from this decision?

Mishandling a grievance or disciplinary process can give rise to a breach of the implied term of trust and confidence. If the employee has two years' service, they can resign in response to that breach and claim constructive dismissal. If the process is mishandled because the employer makes discriminatory assumptions, the employee will also be able to bring a discrimination claim.

This decision makes it absolutely clear that an employee does not have to exhaust their employer's contractual grievance procedure before deciding whether to resign in response to a fundamental breach. They can refuse to engage at all or withdraw from the process at any stage. That said, an employee who decides not to engage, or ends the process prematurely, may face financial consequences if they win their claim. Tribunals have a discretion to reduce a compensatory award if one party fails to follow the Acas Code of Practice on Discipline and Grievances (although it is worth noting that this only anticipates one level of appeal). 

An employer can certainly argue that an employee should have their compensation reduced if they have failed to follow the grievance process and thereby prevented it from correcting any errors which occurred during the earlier stages. But how much weight a tribunal would give to these arguments where there are several levels of appeal is a moot point.

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