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Constructive Dismissal

What is constructive dismissal?

Constructive dismissal is perhaps one of the most misunderstood terms in all of employment law. A constructive dismissal is where an employee resigns, and is entitled to resign without notice, because of their employer’s conduct. It is not sufficient for the employee to simply allege that they have been mistreated. The employee must clearly identify how and when the employer has breached a serious or fundamental term going to the root of the employment contract. This is known as a repudiatory breach.

Fundamental terms of the contract that an employer may breach include cuts in pay or working hours or breaches of the implied terms of trust and confidence or the duty to provide a safe working environment.

Examples of constructive dismissal

It may be relatively straightforward for the employee to prove that the employer has breached a fundamental term of their contract when it relates to cuts in pay or hours. (But see constructive unfair dismissal below). It is much more difficult to prove constructive dismissal claims based on breaches of trust and confidence and employees must take care before deciding to resign and claim constructive dismissal on this basis. The courts have found the following breaches of contract to be sufficiently serious to entitle the employee to resign and claim constructive dismissal:

  • Reduction in pay or hours.
  • Changes in employment duties or employment status.
  • Changes in location where there is no mobility clause in the contract.
  • Excessive workload.
  • Failure to address a grievance.
  • Discrimination.
  • Inept handling of disciplinary matters.
  • Intolerable working environment.

Must the employee resign immediately to claim constructive dismissal?

The employee may resign with or without notice, what matters is that he should be entitled to terminate the contract without notice. In reality not many employees do resign with notice when intending to claim constructive dismissal because that will undermine their argument that the working conditions or behaviour of the employer is intolerable. The courts have also decided that it is not strictly necessary for the employee to resign giving the reasons for the resignation and stating that they consider themselves to be constructively dismissed. That said it is important that the employee does state clearly the reason for the resignation and that they consider themselves to be constructively dismissed. If they fail to do this it may add strength to the employer’s argument that the real reason for their resignation was not a constructive dismissal.

Employees may resign in response to a breach that the employer has already carried out (known as an actual breach) or in response to a fundamental breach that the employer intends to do in the future (an anticipatory breach). For example, the employer may tell the employee that he will need to move to a new location the following month.

It is vital that the employee clearly demonstrates their opposition to the employer’s conduct or actions and that they should not wait too long before resigning. If they continue to work the employer may argue that the employee has not accepted the breach and has affirmed the contract. In other words they have overlooked the employer’s alleged breach and have decided to carry on working under the employment contract.

The “last straw” doctrine

Often the employee will resign in response to a one-off act by the employer. They may also resign due to a continuing course of conduct that extends over a period ending in an incident that is perhaps not that serious on its own but proves to be the “last straw” for the employee. 

Can a breach be cured?

An employer cannot “cure” their repudiatory breach of contract. This means that even if the employer tries to make amends, for example by restoring the employee’s original job title, duties or pay, it will be too late if the employee has decided to resign and claim constructive dismissal. There can be an important difference between where an employer subjects the employee to poor management practice that is not sufficiently serious to amount to a fundamental breach. In these circumstances the employer may quickly try to make amends and liability for a constructive dismissal claim can be avoided.

What is the difference between a constructive dismissal and constructive unfair dismissal?

Constructive dismissal is a breach of contract claim. That means that the only damages available to the employee claiming constructive dismissal are those sums which are due to him under the terms of his employment contract. If the employee has resigned without notice that will usually be just the employee’s notice pay or other contractual benefits due during the notice period. The employee does not need any particular length of service to claim constructive dismissal.

An unfair dismissal, on the other hand, is a statutory claim which, in most circumstances, can only be claimed by employees with two years’ service. Often these employees will combine their constructive dismissal claim with an unfair dismissal claim giving us the term constructive unfair dismissal. If the tribunal finds the employer liable for constructive dismissal the finding of unfair dismissal will often, but not always, follow. For example, an employer may cut the employee’s contractual hours. This is a repudiatory breach of contract and in those circumstances the employee would win his constructive dismissal claim. However the employer may argue that it cut the hours for a genuine business reasons, such as a shortage of customer orders, and in those circumstances the dismissal was potentially fair. The employee would win the constructive dismissal claim (i.e. his notice pay) but may lose the unfair element of his claim.

What are the timescales to bring a claim for constructive dismissal?

Claims must be submitted to the employment tribunal within three months less one day of the date the employment contract terminated. This time limit may be extended by up to one month, or in some cases six weeks, under the compulsory Acas Early Conciliation procedure. In some cases it may be more advantageous for the claimant to bring the breach of contract claim in the county court. This is because damages for breach of contract claims in the employment tribunal are limited to £25,000. The time limit to submit a claim in the county court for breach of contract is six years although it is unwise to leave it so long before submitting a claim.

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