An employer’s guide to constructive dismissal

If an employee is forced to resign because an employer has done something that seriously breaches their Contract of Employment, this will be considered constructive dismissal.

In these cases, for constructive dismissal, the employee’s resignation is actually considered a dismissal and they are entitled to resign without providing notice.

What are the requirements for a constructive dismissal claim?

In order to make a claim for constructive dismissal, an employee needs to show the following:

1 There must be a fundamental breach of contract by the employer. This means it must be serious enough that it justifies why the employee has been left with no choice but to leave.

2 The resignation must be as a result of a breach that has already occurred (an actual breach).Or it may be a breach the employer intends to do at a later date (an anticipatory breach).

3 The employee should leave their job in response to the breach. If they stay too long after the breach, it may be considered they have accepted the conduct and ‘affirmed’ the contract.

What conduct or treatment could result in a claim for constructive dismissal?

It must breach a fundamental term, which goes to the root of the employee’s contract.

This covers both express contractual terms (those that have been specifically mentioned in the contract or have been agreed by the parties). Examples include terms about pay or working hours.

It also covers implied terms (those that are not written down or mentioned in the contract, but that still need to be followed). The most common implied term used in constructive dismissal claims is the duty of trust and confidence.

The following circumstances could constitute constructive dismissal:

  • Refusing to pay an employee contractual overtime.
  • Taking away contractual benefits.
  • Demoting them without justification.
  • Reducing their hours.
  • Failing to address a grievance.
  • Requiring them to relocate to another work site without providing reasonable notice.
  • Not providing a safe working environment.

It may be one very serious incident. Or it may be a series of serious incidents that together led to the ‘last straw’.

Remember that whether your conduct or treatment is serious enough will depend on the individual facts and circumstances of each case.

What if the employee didn’t raise a grievance first?

It’s not a defence to say the employee did not raise a grievance in response to this breach.

Employees should try and sort out any workplace dispute with their employer by speaking to their line manager and going through the steps set out in the organisation’s formal grievance procedure. In cases where an employee fails to do this, it may result in a reduction in the amount of compensation awarded to them.

What is the difference between unfair dismissal and constructive dismissal?

Constructive dismissal concerns the employer’s conduct and treatment towards the employee and how that breach leaves an employee with no choice but to resign.

Unfair dismissal is where an employer dismisses an employee for a reason that does not come within the scope of one of the five potentially fair reasons, does not act reasonably in the circumstances when treating it as a sufficient reason for dismissing the employee or does not follow a fair redundancy or dismissal process.

What is the minimum length of service required to make a claim?

In general, employees will need to have worked for you for at least two years to make a claim. Exceptions do apply.

How can employers prevent these claims?

The requirements to make a claim are notoriously tricky for employees to prove. This is especially the case if the second condition of resigning in response to the employer’s breach. They will need to demonstrate that they did not resign as a result of other reasons, for example, to get out of restrictive covenants.

Defending claims are stressful, time-consuming and involve significant resource, so to reduce the risks:

  • Make sure you are familiar with the terms in your contracts and do not take any steps that violate them.
  • In most cases, if you want to make changes to a term in the contract, you will need to consult with the employee first. If you fail to do this, it may be considered a breach of contract.
  • Your managers should be trained to spot workplace problems and step in to prevent them from escalating.
  • Encourage employees to raise a formal grievance if they have a complaint. By dealing with it through the proper channels, you can limit the risk of employees feeling that the only way to rectify the problem is to resign.

It’s a complex area of law, therefore we would recommend that you seek legal advice at the earliest opportunity.