BG plc v O'Brien [2001] IRLR 496 EAT
Latest in a developing line of cases on the scope of the contractual obligation of mutual trust and confidence is BG plc v O'Brien. Mr. O'Brien was placed with the Respondents in August 1995 by a recruitment agency but maintained that by 12 February 1996 he worked under a contract of employment which the Tribunal accepted.
If the Respondents had accepted his permanent employee status Mr. O'Brien would have been offered a revised contract that provided for bonus payments and an enhanced redundancy payment to soften the blow of a closure programme, staged over five years. To qualify, employees had to have three month's service, be a permanent employee and have signed a revised contract accepting the redundancy terms.
Mr. O'Brien was never offered the revised contract because the employer did not recognise him as a permanent employee, and so he could not meet the third criteria. Every other employee was offered the revised contract. The EAT held the failure to offer O'Brien the opportunity of entering into a revised contract with enhanced redundancy terms was a breach of the implied term of mutual trust and confidence by the Respondents. This meant that the Respondents could not rely on their breach to avoid paying the enhanced redundancy terms as it was their fault he had no contract to sign.
This case is a very useful review of the line of authorities on the scope of mutual trust and confidence. The EAT firmly rejected an argument that the implied term of trust and confidence was not capable of imposing positive duties on an employer to do something, but only negative duties such as not to act capriciously. The EAT reiterated that the implied duty of trust and confidence has been applied in relation to the exercise of an employer's discretion in a number of situations - both in positive and negative duties in a number of situations such as the exercise of a mobility clause, the refusal of a transfer, the amount of a pay rise and bonus and as to dismissal.
The way a Tribunal or other Court should approach the question is to consider, objectively speaking, whether the employer has conducted itself in a manner likely to destroy or seriously damage the relationship of trust and confidence between the employer and employee. If the conduct has that effect, then the question of whether there has been a reasonable and proper cause for the behaviour must be considered. If an employer cannot show reasonable and proper cause for such behaviour it is probable that he would be acting in a manner which no reasonable employer would adopt and there would be a fundamental breach of the implied term.
The offer of the enhanced terms to all staff except Mr O'Brien was capable of being an act calculated to seriously damage the trust and confidence between an employer and employee. The fact that the employer failed to appreciate Mr O'Brien's true status as an employee was not a reasonable and proper cause and it was an act that no reasonable employer could take.
The employers had breached their obligation of fair dealing towards Mr O'Brien.