Constructive Dismissal

What is Constructive Dismissal?

Constructive dismissal occurs when an employee resigns due to a fundamental breach of contract by their employer. This breach must be serious enough to justify the employee’s decision to leave their job. Unlike traditional unfair dismissal, where the employer explicitly terminates the employment contract, constructive dismissal requires the employee to prove that their resignation was a direct result of the employer’s actions.

Legal Framework and Definition

The legal framework governing constructive dismissal in the United Kingdom is primarily found in the Employment Rights Act 1996. Under this Act, an employee has the right to claim constructive dismissal if they can demonstrate that their resignation was due to a fundamental breach of contract by the employer. The Employment Appeal Tribunal (EAT) and higher courts have further refined the interpretation of what constitutes a fundamental breach, making it a complex and nuanced area of law.

Key Elements of Constructive Dismissal

To successfully claim constructive dismissal, an employee must establish several key elements:

Fundamental Breach of Contract

The employer’s actions must amount to a fundamental breach of contract. This breach can arise from either express terms (specific clauses in the employment contract) or implied terms (basic rights and duties inherent in the employment relationship). Examples include non-payment of wages, significant changes to job roles without consent, or a hostile work environment.

Repudiatory Conduct

The employer’s conduct must be repudiatory, meaning it demonstrates an intention not to be bound by the employment contract any longer. This conduct can be a serious incident or a series of actions collectively undermining the employment relationship.

Employee’s Resignation in Response

The employee must resign in response to the employer’s breach. The resignation must directly result from the breach and not be due to unrelated factors. Additionally, the resignation should be timely, as any significant delay might be seen as the employee accepting the breach and waiving their right to claim constructive dismissal.

No Waiver of Rights

The employee must not have waived their right to claim constructive dismissal. This means that if the employee continues to work for a significant period after the breach, they may be deemed to have accepted the employer’s conduct and lost the right to claim constructive dismissal.

Common Grounds for Constructive Dismissal

Several scenarios can give rise to a claim of constructive dismissal. While each case is unique, common grounds include:

Non-Payment or Late Payment of Wages

Failure to pay wages on time or at all is a fundamental breach of contract. Employees are entitled to receive their agreed salary, and any significant deviation from this obligation can justify resignation and a claim of constructive dismissal.

Unilateral Changes to Job Role

Significant changes to an employee’s job role, responsibilities, or working conditions without their consent can constitute a fundamental breach. This might include demotion, changes in location, or unreasonable increases in workload.

Bullying and Harassment

A hostile work environment, including bullying, harassment, or discrimination, can make it untenable for an employee to continue working. Employers have a duty to provide a safe and respectful workplace, and failure to address such issues can lead to constructive dismissal claims.

Unreasonable Disciplinary Action

Disciplinary actions that are unjustified, overly harsh, or conducted without following proper procedures can undermine the employment relationship. Employees subjected to such actions may have grounds for claiming constructive dismissal.

Breaches of Trust and Confidence

The implied term of mutual trust and confidence is fundamental to the employment relationship. Actions by the employer that destroy this trust, such as unfounded accusations of misconduct or unethical business practices, can justify an employee’s resignation.

Legal Process for Claiming Constructive Dismissal

Claiming constructive dismissal involves a legal process that requires careful documentation and adherence to procedural requirements. Employees considering this route should seek legal advice early to ensure they understand the steps involved and the evidence needed to support their claim.

Resignation Letter

The resignation letter is a critical piece of evidence in a constructive dismissal claim. It should clearly state that the resignation is due to the employer’s breach of contract and outline the reasons for resigning.

Gathering Evidence

Employees must gather evidence to support their claim of constructive dismissal. This can include emails, witness statements, notes of meetings, and any other documentation that demonstrates the employer’s breach of contract and the impact on the employee.

ACAS Early Conciliation

Before lodging a claim with the Employment Tribunal, employees are required to engage in Early Conciliation through the Advisory, Conciliation and Arbitration Service (ACAS). This process aims to resolve disputes without the need for formal tribunal proceedings. If conciliation is unsuccessful, ACAS will issue a certificate, allowing the employee to proceed with their claim.

Filing a Claim with the Employment Tribunal

If conciliation fails, the employee can file a claim with the Employment Tribunal. The claim must be filed within three months of the date of resignation. The tribunal will review the evidence and determine whether the employee was constructively dismissed.

Tribunal Hearing

During the tribunal hearing, both parties will present their evidence and arguments. The tribunal will consider whether the employer’s conduct amounted to a fundamental breach of contract and whether the employee’s resignation was justified. If the claim is upheld, the tribunal may award compensation for loss of earnings, future loss of earnings, and other financial losses resulting from the dismissal.

Defences Against Constructive Dismissal Claims

Employers facing constructive dismissal claims can defend themselves by demonstrating that their actions did not constitute a fundamental breach of contract or that the employee did not resign in response to any breach. Common defences include:

No Fundamental Breach

Employers can argue that their actions did not amount to a fundamental breach of contract. This may involve demonstrating that any changes to the employee’s role were reasonable and within the terms of the employment contract.

Employee’s Conduct

If the employee’s own conduct contributed to the situation, the employer might argue that the resignation was not solely due to the employer’s actions. For example, if the employee engaged in misconduct, this could undermine their claim.

Acceptance of Breach

Employers can argue that the employee accepted the breach by continuing to work without raising objections. A lack of formal complaints or a sizable gap between the breach and the resignation can serve as proof of this.

Reasonable Behaviour

Employers can defend themselves by demonstrating that their behaviour was reasonable and justified under the circumstances. This may include evidence of following proper procedures and acting in good faith.

Practical Considerations for Employers and Employees

Navigating constructive dismissal requires a careful balance of employers’ and employees’ rights and responsibilities. Practical considerations can help manage risks and ensure fair treatment in the workplace.

For Employers:

1. Maintain Clear Communication: Employers should communicate clearly and transparently with employees regarding any changes to roles or working conditions. Keeping employees informed and involved in decision-making can prevent misunderstandings and disputes.
2. Follow Proper Procedures: Adhering to established disciplinary actions, grievances, and performance management procedures is crucial. Proper documentation and a fair process can protect employers from claims of unreasonable behaviour.
3. Address Issues Promptly: It is essential to address complaints of bullying, harassment, or other workplace issues promptly and effectively. Employers should have clear policies in place and ensure they are consistently applied.
4. Regular Training: Providing regular training for managers and staff on employment law, workplace rights, and effective communication can help create a positive work environment and reduce the risk of constructive dismissal claims.

For Employees:

1. Document Everything: Employees should keep detailed records of any incidents, communications, and actions taken by their employer that they believe constitute a breach of contract. This documentation can be critical in supporting a constructive dismissal claim.
2. Raise Concerns Formally: Employees should formally raise any concerns or grievances, following the employer’s procedures. This demonstrates that the employee attempted to resolve the issue before resigning.
3. Seek Legal Advice Early: Consulting with a solicitor early can help employees understand their rights and the strength of their claims. Legal advice can also guide the employee through the resignation process and subsequent legal steps.
4. Consider Alternatives: Before resigning, employees should consider all alternatives, such as requesting a transfer, mediation, or other dispute resolution methods. Resignation should be a last resort after all other options have been exhausted.

Case Law and Examples

Examining case law can provide valuable insights into how tribunals interpret and apply the principles of constructive dismissal. Notable cases include:

Western Excavating (ECC) Ltd v Sharp [1978] ICR 221

In this landmark case, the Court of Appeal established that constructive dismissal requires the employer’s fundamental breach of contract. The case involved an employee who resigned after being refused financial assistance. The court ruled that there was no constructive dismissal, as the employer’s actions did not constitute a fundamental breach.

Morrow v Safeway Stores plc [2002] EWCA Civ 318

This case involved an employee who resigned after being subjected to disciplinary action. The Court of Appeal held that the employer’s conduct did not amount to a fundamental breach, as the disciplinary process was fair and justified. The employee’s claim of constructive dismissal was dismissed.

Palmanor Ltd v Cedron [1978] IRLR 303

In Palmanor, an employee resigned after being subjected to abusive language and threats by their employer. The tribunal found that the employer’s conduct constituted a fundamental breach of the implied term of mutual trust and confidence, upholding the employee’s claim of constructive dismissal.

Conclusion

Constructive dismissal is a complex and challenging area of employment law with significant implications for employers and employees. Understanding the legal framework, key elements, and common grounds for claims is essential for effectively navigating potential disputes.

At DLS Solicitors, we are committed to providing expert guidance and support on all matters related to constructive dismissal. Whether you are an employer seeking to defend against a claim or an employee considering a constructive dismissal claim, our team of experienced solicitors is here to help. By combining legal expertise with practical advice, we ensure our clients are well-equipped to handle the challenges and opportunities presented by constructive dismissal.