What is Constructive Dismissal?

When can an employee claim to have been constructively dismissed? 

A constructive dismissal occurs where an employer doesn’t actually dismiss the employee but instead the employee resigns and claims that they did so in response to their employer’s conduct towards them which was so unreasonable as to amount to a fundamental breach of their contract of employment which entitled them to resign.  In order to succeed in their argument that their resignation should be viewed as a dismissal by the employer, the employee must show that the employer had behaved in such a way as to demonstrate that it did not intend to be bound by the contract of employment.

That can be the case where the employer breaches an express term of the contract of employment (for example unilaterally reducing the employee’s pay) or breach of an implied term of the contract. The most common implied term relied upon in this context is one which says that the employer will not conduct itself in such a way as is designed or likely to destroy or seriously damage the relationship of trust and confidence which should exist between an employer and an employee. 

If the employee wants to accept that breach of contract by the employer they resign from the employer’s employment. They must not delay too long in accepting the breach because they could be argued to have accepted the behaviour and therefore waived any breach of contract which may have occurred.

Equally as the argument is that the employer has destroyed the contract between the parties the employee is therefore released from their obligations under the contract as well, including the obligation to provide a certain period of notice of termination. It may be contradictory to the employee’s position were they to uphold their part of the contract by giving notice of the termination of their employment rather than terminating with immediate effect.

What are some examples that might amount to a breach entitling an employee to resign and claim constructive dismissal? 

An employer will usually be in fundamental breach of an employee’s contract of employment if they impose a pay cut on the employee without prior agreement.

Discriminating against an employee on the grounds of a characteristic protected under the Equality Act 2010 is also likely to constitute a fundamental breach which would entitle an employee to resign and bring a constructive dismissal claim. 

Changing contractual duties and inept handling of a disciplinary or grievance matter may also be a breach, depending upon the circumstances, as would the creation or acceptance of an intolerable working environment where an employee is subject to abusive behaviour and bad language on a regular basis. 

Employers must also be aware that a constructive dismissal claim may be based on the behaviour of a fellow employee and an Employment Tribunal could find the employer vicariously liable in such circumstances. 

What should an employer do when an employee resigns to protect against a constructive dismissal claim? 

If the employee has already resigned then there may be little that can be done to protect against such a claim if there has in fact been a fundamental breach of contract. However an employer should take such issues seriously. Investigating and taking remedial action to prevent such occurrences in the future may well be viewed favourably by an Employment tribunal in any subsequent proceedings as evidence that the employer did consider itself to still be bound by the contract of employment.

It may be that the employer engages with the employee either directly or via the Acas Early Conciliation process in order to investigate whether it may be possible to resolve matters amicably and avoid a complaint to a Tribunal. 

The Dean Wilson Employment Law team are well placed to advise either employer or employee on issues arising from a potential constructive dismissal situation, and how best to proceed.