Which of the following scenarios depicts the concept of constructive discharge

If an employee feels forced to resign because they’ve been mistreated at work, they may be able to claim constructive dismissal. As an employer, these cases can be costly and complex to defend, so being able to pre-empt any resignation decision can save you time and money. It can also help to safeguard a valuable member of staff who may be being treated unfairly.

In this guide, we explain what a constructive dismissal claim could mean for your organisation, including how to spot the signs and how to prevent an employee from resigning. We also look at ways in which you can minimise the risk of litigation if an employee does decide to leave.

What is constructive dismissal?

Constructive dismissal arises where the employer has committed a serious breach of contract in response to which the employee feels they have no choice but to resign. In a constructive dismissal context there will have been no actual dismissal. However, if the conduct that led to the employee’s resignation is sufficiently serious, this will entitle the employee to regard themselves as having been dismissed in consequence of that conduct.

Under section 95(1)(c) of the Employment Rights Act 1996, an employee will be treated as having been dismissed where they terminate the contract under which they are employed, either with or without notice, in circumstances in which they’re entitled to terminate it without notice by reason of the employer’s conduct. This means that, provided the employee can prove a sufficiently serious breach, together with a causal connection between their resignation and that breach, the law will treat that resignation as a form of unfair dismissal.

An employee will be eligible to claim ‘constructive unfair dismissal’ if they’ve worked for you continuously for at least two years. However, there will be no qualifying length of service where the reason for the constructive dismissal is one which can be classed as automatically unfair, for example, if you’ve unlawfully discriminated against an employee.

What is the test for constructive dismissal?

To prove a constructive dismissal, an employee must be able to show:

• There’s been a serious breach of their contract of employment, and
• They’ve resigned in response to that breach and not for some other reason.

As to the first limb of this twofold test, the employee must be able to show a fundamental breach of their employment contract. This could be a breach of either an express contractual term or breach of the implied term of mutual trust and confidence but, in either case, this must be sufficiently serious so as to justify termination of their contract.

A fundamental breach can be shown either by a single incident, provided this is, of itself, serious enough to entitle the employee to treat him or herself as dismissed. It can also be shown by a continuing pattern of behaviour which, taken as a whole, would justify resigning.

As to the second limb of the test, the employee must show that the actions of the employer resulted in their resignation. This often means that the employee’s decision to resign must quickly follow the conduct complained of, unless they’ve made it clear that they’re working under protest. If there is a marked time gap between the conduct complained of and the employee either lodging a formal grievance or handing in their resignation, an adverse inference can potentially be drawn here from any delay.

This means it may be possible to argue that the employee did not resign in response to the alleged breach, but rather for a wholly unrelated reason. It may also be possible to argue that they accepted or acquiesced in the conduct, thereby waiving any contractual breach.

Constructive dismissal examples

A claim for constructive dismissal requires proof of contractual breach that is so serious it goes to the root of the employment relationship. Common examples of breaches of contract that could form the basis of a claim could therefore include:

• Reducing an employee’s pay or not paying them at all
• Taking away other contractual benefits, such as a company car
• Demoting an employee without fair warning
• Making unreasonable changes to an employees’ working hours or place of work
• Forcing an employee to work in breach of health and safety laws.

These are all fairly stark examples of serious breaches of contract which would usually justify an employee’s resignation, unless the employer can provide a good explanation and legal justification for their actions. However, constructive dismissal claims can often arise as a result of other more subtle forms of behaviour, typically taking place over prolonged periods of time and resulting in ‘the last straw’ that leads to the employee resigning.

Other more subtle constructive dismissal examples can therefore include:

• Subjecting an employee to constant unfair criticism
• Demeaning an employee in front of others
• Bullying or discriminating against an employee or turning a blind eye to this
• Refusing to investigate or thoroughly investigate any grievance raised by an employee
• Failing to provide an employee with adequate support to do their job.

These types of allegations will often be directed at line managers, team leaders or co-workers, although the employer can still be liable for the actions or omissions of its’ employees.

In some cases there may be numerous minor incidents which, in isolation, would not amount to a fundamental breach of contract. However, their cumulative effect, especially where an employee has complained of such matters but the employer has failed to take all reasonable steps to resolve their complaint, can still form the basis of a successful claim.

That said, much will depend on the circumstances of the case and the context in which any conduct complained of took place. This will be a question of fact for any tribunal to decide, so these cases are rarely clear-cut. That said, it’s vital that employers are alert to the possibility that if they fail to take steps to safeguard their employees, especially where they’ve been made aware of any potential conflict at work, they could find themselves facing a tribunal claim.

How to spot warning signs

There are various tell-tale signs that an employee may be contemplating resignation. In some cases, the employee may have expressly warned you of their intentions to resign unless things change, whilst in other cases, the possibility of them resigning may be more difficult to detect.

Working under protest

The most obvious indication that an employee is considering resignation is if they notify you, either verbally or in writing, that they’re working under protest. This is a tactic that can be used by an employee following an alleged breach of contract. This essentially means that they will continue working for you, albeit on a short-term basis, whilst making it clear that unless any alleged breach is remedied, they reserve the right to resign in response to this.

If an employee adopts this approach, it’s highly likely that if you fail to rectify the matter complained of they will feel forced to resign. It’s also likely, given the strategic nature of ‘working under protest’ so as to preserve any constructive dismissal claim, that the employee has already sought legal advice and is well aware of their right to litigate.

Filing an internal grievance

If an employee makes a complaint about the way they’re being treated at work, although this may not necessarily indicate an intention to resign, this can act as an early warning sign. Further, any failure on your part to investigate or thoroughly investigate a grievance, and take appropriate steps to resolve the matter, can cause irreparable damage to the employment relationship. Even if you believe that there’s no merit to an employee’s allegations, you must still take any internal grievance seriously. A failure to follow your own or any fair grievance procedure could, of itself, amount to a fundamental breach of contract.

Providing negative feedback

Many employers will ask their employees to undergo an annual or bi-annual performance review, providing both parties with the opportunity to evaluate the employees’ progress and set new targets. These reviews will also provide the employee with an opportunity to raise any concerns that they may have at work.

If an employee discloses any negative feedback during a review, it’s vital that you follow up on this. It may be that any issues can be easily resolved, without the need for a formal grievance procedure. Again, however, any failure on your part to address any problems in the workplace can easily allow things to escalate into something much bigger.

When an employee resigns

Resigning from their job role will be a risky step for any employee to take, without any guarantee that a claim for constructive dismissal will succeed, especially as these types of claims are notoriously difficult for employees to prove. Still, if an employee is genuinely suffering at work and struggling with the way in which they’ve been treated, they may feel they have no other choice but to resign. In some cases, resignation decisions can be made in the heat of the moment when emotions are running high and without any advance warning.

Still, in most cases the tell-tale signs will be there, provided of course you have adequate grievance and review procedures in place, and so doing nothing, allowing the status quo to continue, can contribute to the problem. As a reputable employer, one who cares about the wellbeing of its workforce, you must take proactive steps to resolve any workplace issues as quickly and effectively as possible. This should include taking disciplinary action, where appropriate, in relation to those against whom allegations of unacceptable conduct are made.

If an employee does resign in the heat of the moment, the situation may not yet be lost. By giving the employee some time to calm down and exploring their reasons for wanting to leave, you may still be able to rectify the situation. In many cases a sympathetic ear and showing some understanding can help to ease tensions so that you can get to the root cause of any problems and seek to resolve these moving forward. Any attempts to make amends may not necessarily cure any breach, where the employee could still decide to resign, but taking proactive steps will at least provide you with grounds to defend any claim against you.

Pre-empting a constructive dismissal claim?

There are a number of ways in which you can minimise the risk of litigation where an employee does decide to leave. By seeking early professional advice from an expert in employment law, this can help you to secure a decent exit package or settlement agreement with an employee, or to otherwise take pre-emptive steps to prevent a claim from arising.

A settlement agreement is an agreement in which an employee agrees to leave quietly, waiving their right to sue for unfair dismissal in return for a severance payment. This can be a very useful tool for employers looking to reduce the risk of being sued for constructive unfair dismissal. In circumstances where both parties are looking to bring the employment relationship to an end, there is likely to be a basis upon which discussions can be had, where the real question is often how much an employee will be willing to accept to leave on good terms and waive their right to litigate.

If a settlement agreement can’t be reached, there may still be scope to resolve any complaint if the employee decides to pursue the matter further. This is because a claim must be lodged with ACAS under the ‘early conciliation scheme’ as a preliminary step to any proceedings. At this stage expert legal advice and representation can be crucial to a resolution.

Need assistance?

DavidsonMorris’ team of employment law specialists offer support and advice to employers with all aspects of workforce management, including issues relating to constrictive dismissal and contentious exits. Constructive dismissal is a highly technical area and given the many factors to consider and the complexities and sensitivities of the issues typically involved, we recommend taking early advice to understand your rights and the options open to you to ensure your best interests are protected.

Contact our employment lawyers for advice and guidance on any aspect of constructive dismissal.

Constructive dismissal examples FAQs

When can you claim constructive dismissal?

Constructive dismissal can be claimed by an employee with at least 2 years’ continuous service in circumstances where they feel forced to resign because of a fundamental breach of contract on the part of their employer.

Constructive dismissal can be claimed by an employee with at least 2 years’ continuous service in circumstances where they feel forced to resign because of a fundamental breach of contract on the part of their employer.

An employee must show that they’ve resigned in response to a fundamental breach of contract. This is a breach so serious that it justifies the employee treating themselves as having been dismissed and the contract coming to an end.

What are examples of constructive dismissal?

Constructive dismissal examples that can constitute a fundamental breach can include reducing an employee’s pay or not paying them at all, demoting an employee without fair warning, or making unreasonable changes to an employees’ working hours or place of work.

How can you prove constructive dismissal?

A constructive dismissal claim can be proved by showing a decision to resign in response to either a fundamental breach of an express term of the employment contract or breach of the implied term of mutual trust and confidence.

Last updated: 18 August 2022

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