Constructive Dismissal

What is constructive dismissal?

This is a resignation which an employee feels forced into due to the behaviour of their employer. If a judge decides that the employee’s decision to resign was reasonable then they should win compensation for unfair dismissal. The employer must have committed a serious wrongdoing like those in the list below.

What constitutes constructive unfair dismissal?

  • Not paying employee wages.
  • Demotion.
  • Changing conditions of the employment contract without notice (such as hours, shifts) which the employee would have to either accept or leave.
  • Bullying in the workplace
  • Wrongly subjecting you to disciplinary proceedings.
  • A series of events that have gone unresolved and built up, forcing the employee to leave.
  • Lots of other behaviour, which caselaw may have adjudicated on in previous cases.

It is hard to give examples of what can be a constructive dismissal because the limits of poor employer behaviour are endless.

Importantly, the employee must act immediately after the breach occurs; if this is delayed, the employer can say that the employee ‘affirmed the breach of contract’ by continuing to work for the employer. The timescale for resigning is something on which advice should usually be taken if an employee is thinking of resigning.

The law

Constructive dismissal is the term used where an employee resigns in response to their employer’s conduct in breach of an important term of their employment contract. This can be an express or an implied term.

Where an employer has breached an important express or implied term of the employment contract, an employee is entitled to treat him or herself as having been “dismissed“ by resigning and calling it a dismissal. This term can be an express term (these are usually recorded on paper but can be shown by a course of dealing) or an implied term (that is, implied into the employment relationship by statute, caselaw or custom within the business or the industry sector).

An example of breach of an express term would be removing your right to a car or salary or perhaps your job descriptions.

An example of breach of an implied term would be the term that neither party will damage the ‘mutual trust and confidence in the employment relationship without good cause’. This is often relied on by employees where the relationship has irrevocably broken down because of factors such as those in the bullet points above.

The employer’s conduct is referred to as “a repudiatory breach”. You can resign after a breach happens or after it is threatened but before it takes place.

For a constructive dismissal claim to succeed, the employee needs to show that:

  • The employer was in repudiatory breach of the employment contract
  • The employee resigned in response to that breach and
  • They did not delay too long in resigning

An employee can never be 100% confident about showing breaches of trust and confidence before a tribunal hearing. But neither can the employer, which means you can often settle the matter amicably without needing to seek employment tribunal compensation.

Should I resign? When? How?

If you wish to pursue a claim for constructive dismissal, it is important that you resign promptly in response to a fundamental breach.

The one exception to this is where there have been a number of fundamental breaches over a long period, in which case you may be able to resign in response to a less serious ‘last straw’ but this is rarely the preferred option.

How to resign?

You should resign in writing so that there is a paper trail showing how, when and why you resigned. An employer will often suggest that you resigned for your own reasons, which are nothing to do with your work. We will help you to write your resignation letter because a poorly-written resignation letter often is the weakest part of a constructive dismissal case.

Employers often argue that the employee had their own reasons for resigning that were not to do with their work situation. There is a checklist of things that your resignation letter should contain, but you should have prepared the ground well in advance before resigning.

Resigning is a big step and a personal decision for you. You must balance the loss of income from a job that is intolerable against the chance of a financial settlement or tribunal award.

If you delay your resignation you lose you right to treat the contract as breached and will be regarded as “affirmed” the contract.

The timing of looking for a new job needs careful thought. You have a duty to keep your losses to a minimum by job-hunting but looking for a new job whilst still in employment gives the employer an argument that you left because you wanted another job, rather than because you were unhappy.

It is not guaranteed that you would win a case for constructive unfair dismissal and it is not guaranteed that if you did win, you would be awarded all your lost salary. Experience shows that the claimants who win the largest awards are those who can show the best efforts at job-hunting after resigning.

Do I need to give notice when I resign?

You can decide to resign with or without notice. It should not affect your claim for constructive dismissal. However, there are circumstances where working your notice could potentially affect your claim (it gives an employer an argument that the conduct cannot have been serious enough to resign about).

Should I raise a grievance?

The law does not require you to follow a grievance process but generally speaking, you should do so before bringing a claim for constructive dismissal or you risk a tribunal reducing any compensation by up to 25%. That is one reason we guide our clients through the grievance process; another reason is to lay down a paper trail about what has been happening.

What compensation will I be entitled to?

As our page on compensation for unfair dismissal sets out, for the breach of contract claim you would be entitled to your net pay and the value of any benefits that you would have received had you worked through your notice period.

The employment tribunal will consider whether your dismissal was fair or unfair and in doing so will look at a range of factors including whether your employer acted reasonably.

If you are successful in your claim for constructive unfair dismissal, you will be entitled to a basic award calculated on the basis of your age, salary and length of service. In addition, the tribunal has discretion to award you compensation for any loss flowing from the dismissal up to a maximum of a year’s salary (the “compensatory award”). This will take loss of earnings from the date of termination of your employment into account. However, as with compensation for breach of contract, the tribunal will look at whether you have taken reasonable steps to minimise your loss.

Any compensatory award made to you will be reduced by any compensation awarded to you under the breach of contract claim above. This is because you cannot recover damages twice relating to the same period of time.

Time limits

An employment tribunal claim form for constructive dismissal needs to be lodged within three months of the date of the termination of your employment although ideally it should be lodged as soon as possible. This date is not always clear. Also, remember that you must act quickly in relation to any poor conduct of your employer that you are relying on.

More than 50% of employees lose these claims so it is important to lay the groundwork properly before resigning. Our clients have a better success rate. Claiming and defending these claims are not always straight forward and our specialism is improving the legal position of the employee who wants to depart and negotiate a settlement on their way out.

The employee must have two or more years’ service to do this. An exception applies in certain cases (for example where whistleblowing is involved) and there is often an angle that can be crafted.

Compensation for constructive unfair dismissal is no different from compensation for unfair dismissal.