Case study: The perils of ignoring contract terms

A MANAGER at a car dealership was awarded more than £70,000 after winning a claim for constructive dismissal. This case highlights the importance of following the terms of an employee’s contract - even if it was written half a century ago.

BACKGROUND: Mr McKenzie had been at the same company for nearly 50 years having started working for Frank Ogg and Son in 1967 at the age of just 15. In 1992, he was transferred to a garage in Elgin run by the same company and the firm was subsequently taken over by Pentland Motor Company in Aberdeen.

He began suffering from stress and was signed off work by his GP after the dealership ran into difficulties prior to the firm being bought over by Pentland.

Mr McKenzie had a rare clause in his contract that stated he was entitled to full pay while he was off sick. However, the new owners at the company believed that this was too generous and instead offered him two months’ full pay as a “gesture of goodwill”.

As a result Mr McKenzie quit his job, claiming the firm had breached his contract.

OUTCOME: Mr McKenzie took the company to an employment tribunal where he received a compensatory award of £73,482 and a further £1,855 for unpaid sick leave.

The tribunal decided that the claimant was entitled to resign from his employment due to his employer’s action in stating that they would not be honouring his contract.

The employment judge James Hendry added: “I had no hesitation in finding the dismissal unfair. A clear written term was overridden without a clear reason for doing so and following virtually no investigation of the matter.”

Changing terms of a contract can be a difficult area and we recommend practices take advice. Further details can be found in our factsheet.