Constructive, Wrongful, and Unfair Dismissals

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.

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.

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.

Employees with two years less one week of continuous service are protected by the Employment Rights Act 1996 (ERA) against being unfairly dismissed. These employees also have the right to a written statement from their employer setting out the reasons for their dismissal. Unfair dismissal and wrongful dismissal are two different things, so it’s good to know the difference between the two and where you stand on both criteria.

Employees do not need any length of service to claim unfair dismissal in certain circumstances where the dismissal will be considered “automatically unfair”; for example, the dismissal is connected with discrimination, whistle blowing, trade union membership or asserting a statutory right.

Individuals cannot claim unfair dismissal if they fall into the legal category of being a “worker” rather than an employee, or if they are self-employed. Identifying an individual’s employment status can be complex and you should take specialist legal advice if you are in doubt. Certain categories of employees are also excluded from making unfair dismissal claims, such as members of the armed services or, in most cases, those working outside the UK.

Wrongful dismissal is different from unfair dismissal and it is important not to confuse the two. It is in fact possible for an employer to be found liable for one but not the other. Wrongful dismissal occurs when the employee is dismissed in breach of the express or implied terms of his employment contract. The issue of fairness is not generally taken into account. Unlike claims for unfair dismissal there is also no qualifying period for a wrongful dismissal claim.

Wrongful dismissal can occur in a number of situations including:

• When the employee has been dismissed (either fairly or unfairly) but without being paid his statutory or contractual notice pay.
• When the employee has been summarily dismissed for gross misconduct and therefore without notice pay when in fact the dismissal only merited an ordinary misconduct dismissal and so notice should have been given.
• When the actions of the employer so severely undermine the employment relationship that the employee is entitled to resign and claim constructive dismissal.
• When the employer dismisses the employee in breach of contractual disciplinary or dismissal procedures.

The compensation or damages an employee may claim for wrongful dismissal are limited to the notice period and/or the period of time it would have taken to complete any relevant contractual procedure. If the employer wrongfully dismisses the employee it will be liable to pay damages to put the employee in the position they would have been in had the contract been terminated in accordance with its terms. Therefore damages will reflect the net value of salary and other contractual benefits to which the employee would have been entitled had they been allowed to work out their notice.