A constructive dismissal is when an employer’s behaviour triggers an employee’s resignation. Not all constructive dismissals are unfair, but an employee who resigns in response to an employer’s fundamental breach of an express or implied term of the employment contract is regarded as having been dismissed for the purposes of an unfair dismissal claim.
1. What are they key elements to a constructive dismissal?
Firstly, the employee must resign.
Secondly, the employee must resign in response to the employer’s fundamental (or repudiatory) breach of contract. Even where the employer has behaved inappropriately, it is not necessarily the case that the employer has infringed a term of the employment contract. There must be a material breach of a contractual term, and this is a question of fact and degree. For example, an employer’s delay to pay wages will not necessarily constitute a material breach, notwithstanding the importance of prompt payment. However, unilaterally reducing an employee’s pay will likely amount to a fundamental breach of an express term of the employment contract. In addition to express contractual terms, implied terms also form part of the employment contract, for example, an employer must not, without reasonable and proper cause, conduct itself in a manner calculated or likely to destroy the relationship of confidence and trust between the employer and employee. Many of the constructive dismissal cases that arise from the undermining of trust and confidence involve the employee leaving in response to a course of conduct carried on over a period; a series of incidents, which in themselves may not constitute a material breach, but may do so when taken together, and there may be a “last straw”. Further, an employer who threatens to break the contract at some point in the future will commit an anticipatory breach of that contract and, in consequence, the employee will be entitled to resign and claim to have been constructively dismissed.
Finally, the resignation must take place within a reasonable period after the breach. There is no set time limit for when the employee must resign; it will depend on the circumstances. However, if an employee delays their resignation, they may be deemed to have affirmed the contract and accepted the situation.
2. Must an employee have 2 years of continuous service to pursue a claim for constructive dismissal?
Usually, an employee does require 2 years’ qualifying service to bring a constructive unfair dismissal claim. However, there is no minimum requirement service for certain claims (for example, those deemed automatically unfair).
3. Must the employee lodge a grievance before resigning?
An employee in a difficult situation in the workplace may wish to give their employer chance to find a solution and, in those circumstances, it may be sensible to raise a grievance. However, it is not essential to raise a grievance before resigning. The law recognises that when an employer has committed a repudiatory breach, an employee does not have to wait around and can resign immediately. Notwithstanding this, if the employee is successful in their claim for constructive unfair dismissal, where the employee has unreasonably failed to raise a grievance, an Employment Tribunal may look to reduce the compensation awarded to them. It is helpful to get advice from an employment solicitor as to your particular situation, as there may be tactical considerations as to whether for negotiating purposes it is better to resign immediately or raise a grievance.
4. How much compensation would an employee get for a constructive unfair dismissal claim?
If an employee is successful with their constructive unfair dismissal claim, they would usually be awarded a basic award (equivalent to a statutory redundancy payment) and a compensatory award (designed to compensate the employee for the loss of any earnings, and subject to a statutory cap of the lower of the employee’s annual salary or the statutory cap for the relevant year – the current statutory cap for 6 April 2023 to 5 April 2024 is £105,707, and this is due to rise on 6 April 2024 to £115,115).
The concept of constructive unfair dismissal is far from easy. It is very difficult for an employee to determine whether the employer has shown intention to abandon the contract. We would recommend any employee potentially facing this situation to take legal advice.
If you wish to discuss this further, or if you have any other employment law enquiries, please contact Rebecca Ellerbeck of Rowberrys on 01344 959166 or r.ellerbeck@rowberrys.co.uk.