Employment law- Constructive dismissal
What is Constructive Dismissal?
Constructive Dismissal is where an employer has committed a serious breach of contract, entitling the employee to resign in response to the employer’s conduct. The employee is entitled to treat him or herself as having been “dismissed”, and the employer’s conduct is often referred to as a “repudiatory breach”.
It is not enough to show merely that your employer has behaved unreasonably. There must be a fundamental breach of either an express contractual term, or the implied term of “trust and confidence”. Furthermore, you must have resigned because of the breach, and you should make it clear when you leave that you regard yourself as having been “constructively dismissed”.
It may not just be one incident that amounts to a breach of contract by your employer. Sometimes there is a continuing pattern of behaviour or incidents which, taken as a whole, amounts to a breach (even though they may not be in isolation). If there is a continuing pattern of behaviour, however, the ‘last straw‘ which leads you to resign must be a relate back to the previous acts, so that added together they all amount to a breach of trust and confidence.
You also do need to be most careful not to be seen to have waived any breach by your employer. This can happen where there is a long delay in your lodging a grievance or taking the decision to resign. This could especially happen if you are off on long term sickness, where you are more likely to delay taking any steps in relation to a breach by your employer. A waiver could also arise if you do something which signals an acceptance of the breach, for example, by sending an email stating that you are happy with forced changes to your contract.
It is possible for you to continue to work in the short term ‘under protest’ following a breach by your employer, and to reserve your full rights in writing. However, there will come a point in time where you must decide if you are going to resign and make a claim. If you do not do so, as mentioned above, you may well have be deemed to have positively affirmed your contract -and a claim will not then be possible.
Examples of claims that can be made for Constructive Dismissal
Examples of breaches of contract by an employer entitling an employee to claim constructive dismissal include:
- a unilateral significant reduction of your salary, or the threat of a reduction ;
- being demoted without good reason;
- allegations of poor performance which are unfounded;
- making unwarranted findings or reporting you to a Regulator without foundation, or an opportunity to respond;
- disciplinary proceedings which are manifestly unreasonable;
- a complete change in the nature of your job;
- harassing or bullying ;
- stress at work, that has not been properly addressed (this includes being overworked);
- failing to make reasonable adjustments where you have a disability;
- being forced to work in breach of health and safety laws.
What is the difference between constructive and unfair dismissal?
A constructive dismissal is where you are forced to resign in response to your employer’s conduct, which has made your position untenable. Although it’s referred to as a “dismissal” in law, it is in practical terms a resignation.
An unfair dismissal, on the other hand, is where you have been sacked in a way that is unlawful. This is usually because either one of the 5 fair reasons for dismissal do not apply, or there has been a failure of process, or it is not reasonable for you to have been dismissed.
How easy is it to make a claim for constructive dismissal?
Firstly, and most importantly, you must have been continuously employed with the same employer for a period of 2 years in order to bring a claim. This is unless your case falls within one of the few exceptions where no minimum service is required, for example, where it relates to discrimination.
If you can show that your employer has fundamentally acted in a way that makes your position untenable and goes to the root of your employment relationship, your claim may well succeed. The onus is on you to prove that your employer was in breach. This differs from unfair dismissal claims where it would be for your employer to prove that there had been a fair dismissal.
In many cases, conduct amounting to a breach by an employer will be obvious. In lots of situations, however, it will be more of a grey area. Yes, your employer may have behaved badly, but was it so bad that it made your continuing to be employed untenable? If the matter reached the tribunal stage, it will be determined on its own facts, and what is considered “reasonable”.
It is always best to obtain early professional advice, as you may significantly prejudice your position if you resign in the belief that you have a good case- when you don’t. You may also need to take some positive steps to preserve the right to bring a claim.
Lodging a grievance- an important step
It is recommended, and expected under the ACAS code of practice, that employees lodge a formal grievance against employers in constructive dismissal claims before taking any steps to resign. The reason for this is that it gives your employer an opportunity to resolve the dispute. The failure to lodge a grievance before resigning also means an employment tribunal can reduce any damages you are awarded by up to 25%.
Even if you have no intention of staying with your employer, the lodging of a grievance (and the contents of it) is an important tactical consideration in relation to negotiating an exit with your employer (see below).
Can my employer defeat my constructive dismissal claim by upholding my grievance or by simply apologising?
No. If your employer has already breached your contract by its actions, it is not possible to “cure” such a breach by attempting to make amends or undo what has been done. You therefore have the right to choose whether to treat the breach as terminating the relationship or not.
As mentioned above, however, you do have to be careful not to be seen to waive the breach by either accepting it or by not objecting to it. If this happens, it is likely to hamper your ability to then claim constructive dismissal.
Do I need to specify that I am claiming constructive dismissal when I resign, and make clear my reason for leaving?
if constructive dismissal is the path you would like to take, then you really should be making your reason for leaving clear when you resign and that you have been constructively dismissed. This will give you the best chance of protecting your position and being able to negotiate and bring a claim, if necessary. If you fail to communicate this to your employer at the time you leave, a tribunal may conclude that your employer’s conduct was not the real reason for your departure.
If you have lodged a grievance beforehand, the reasons why you are not happy will have been set out there, but they should be addressed at the point of resignation too.
You should also not be tempted to write glowing words about your employer when you resign by reason of your employer’s conduct. We have seen many resignation letter which make statements such as “I’ve really enjoyed working with the company”, and “thank you for everything you have done for me”. This is not in the spirit of someone who considers that they have been forced out and wishing to bring a claim.
Can I work my notice when I resign, and still preserve the right to make a claim?
Yes, you can. However, in many constructive dismissal situations, it is more appropriate to resign and leave employment straight away, especially where there is a serious allegation of breach of contract by your employer. The notice period you would have been entitled to then forms part of your constructive dismissal claim.
Where your notice amounts to a period of 6 months or more, and you decide to work this, the courts have held that you would be “affirming” your contract of employment. If there are no further breaches of contract, you would be unable to then make a claim based on constructive dismissal.
What compensation is available for constructive dismissal?
What is the impact on my restrictive covenants if I make a claim for constructive dismissal?
If you can show that you have been constructively dismissed, you may be released from the post-termination restrictions in your contract of employment (such as not working for a competitor, or contacting your employers customers). This is because the very nature of a constructive dismissal claim means that there has been a fundamental breach of contract by your employer, who cannot then rely on that contract in the future.
This may be very welcome where you have been forced out of your job, and don’t want to be hampered in moving to a new employer or dealing with old clients, because of contractual restrictions. It doesn’t mean an automatic passport, though, just because you are claiming constructive dismissal (without the matter first being determined by an employment tribunal). It might work if your claim is strong enough and your employer acknowledges this- or can be persuaded to do so. If not, legal steps could be taken to prevent you from breaching your covenants. It is always best to take legal advice before putting yourself in a position of a potential breach.
Negotiating an exit
There may well be the option of securing a negotiated exit with your employer, and this will depend on the circumstances you find yourself in.
Assuming you have a good legal basis for a constructive dismissal claim, a successful negotiation (as an alternative to bringing a tribunal claim) would usually result in your receiving a lump sum financial package in return for giving up your employment rights. This happens frequently in employment situations, not least because by the time a grievance is formally lodged, the relationship with an employer is likely to have broken down in any event- regardless of the outcome of the grievance.
This is a highly tactical situation and not one that should be adopted without you being aware of the strength of your claim, including what type of settlement is possible. It is for this reason that it is usually far better to have legal representation in negotiating a severance with your employer, so that you do not say the wrong thing or set in chain a set of circumstances which could put a settlement at risk.
We have successfully negotiated thousands of settlements where employees are faced with the dilemma of not being able to continue working for their employer, after their employer’s conduct have made it impossible to continue. Once a resolution is reached with your employer, we always ensure that part of the settlement terms will include an agreed job reference and appropriate non-derogatory clauses, so you are not bad-mouthed in the future.
What is the time period to make a employment tribunal claim?
The process for claiming constructive dismissal should commence within a period of 3 months less 1 day from the date that you have left employment. This is usually the last date that you were paid. However before the tribunal will accept the claim, it needs to be lodged with ACAS as a preliminary step under their “early conciliation scheme“. It is important that this step is carried out properly or your claim will fail. For more information on tribunal time limits and process, please click here.
If I can’t claim constructive dismissal, because I have been employed less than 2 years, is there any other claim I can make?
Although you cannot bring a constructive dismissal claim in the absence of two years’ service, you may be able to make a wrongful dismissal. This is a breach of contract claim, and usually limited to only your notice period. This is because you would be resigning immediately in response to your employer’s breach, and therefore without working your notice. The period which reflects your notice then becomes the main part of your claim for wrongful dismissal.
You are best advised not to resign without taking legal advice first. You may otherwise lose an important tactical advantage against your employer, and also put at risk any subsequent tribunal claim. We can advise you of the best way forward, and will consider a no win- no fee funding arrangement. Please feel free to use the contact information which you will find here.