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What is constructive unfair dismissal?

Constructive unfair dismissal is when an employee is forced to leave their job against their will. Constructive unfair dismissal can be a result of an employer’s conduct such as a sudden demotion, pay reduction or job role change which leaves the employee feeling that they have no other option, but to resign.

The Employment Rights Act 1996 defines constructive unfair dismissal as where “the employee terminates the contract under which he is employed (with or without notice) in circumstances in which he is entitled to terminate it without notice by reason of the employer’s conduct”. Claims must normally be lodged within three months of the termination.

There must be a breach, or anticipated breach, of contract by the employer. This may be a breach of an actual term of the contract (for example relating to hours of work, place of work, holidays, pay etc) or, as is the case quite frequently, an implied term. Implied terms include the duty of mutual trust and confidence and the duty to provide a safe working environment. The implied duty of trust and confidence is the one most commonly used.
Examples include failure to properly investigate complaints of harassment, taking unfair disciplinary action, trying to invoke contractual clauses but in an unreasonable manner so that the employee cannot comply. Constructive dismissal can also be claimed before a breach takes place if it is clear that the employer intends to breach the contract but this does need to be unequivocal, and the intention to breach expressly stated. Acting on rumours would be insufficient.

The nature of the workplace is irrelevant – conduct is judged from an objective standpoint.

The unacceptable treatment does not have to be directed at the employee personally, but may be towards other employees. Note that it is not necessary that the breach of the contract of employment is the principal reason for the resignation. The law only requires that it is ‘a reason’ – it does not have to be the sole reason, or even the main reason.

The breach must be sufficiently fundamental to allow the employee to leave immediately or it can arise from a series of incidents, resulting in the ‘last straw’. If an employer behaves unreasonably, insensitively or stupidly, or is in breach of the contract this may not be sufficient; the breach has to be sufficiently serious that the employee has no other realistic alternative but to resign.

Examples which would normally be considered as sufficiently fundamental include:

  1. a deliberate reduction in pay or change to the payment arrangements (ie reducing a fixed amount of basic pay to one which is heavily dependent on a bonus or commission payment)
  2. refusal to pay wages (but not because of one-off technical or administrative failures)
  3. removal of a contractual benefit
  4. substantially changing an employee’s job, resulting in an unacceptable change in the nature of the work, or loss of status etc
  5. demotion (although this may be reasonable if imposed as a result of fair disciplinary action)
  6. the intolerable behaviour of a manager (eg swearing, bullying, hostile behaviour etc). But note that context and environment can be crucial when assessing this. If, for example, bad language is commonplace and if none of those involved would have been remotely offended, this may be ignored. Bullying or intimidating behaviour would not be.
The employee must resign and it must be clear that the resignation is in response to the employer’s breach, not just because he/she has obtained work elsewhere! The employee does not necessarily have to tell the employer his/her reason for leaving at the time but this does make his/her case harder to prove. An employee can resign and serve out notice but this is uncommon for constructive unfair dismissal.

The employee cannot delay too long before resigning otherwise he/she will lose the right to claim constructive unfair dismissal. There is no set time period and it will depend on the case – ie an employee may continue working whilst pursuing the matter internally first through the grievance procedure, or may try out new terms and conditions for a short period before finding them unacceptable. It must be very obvious however, during the period between the breach of contract and the resignation, that the employee has clearly indicated his/her discontent and has been giving strong signs of an intention to leave unless the matter is resolved.

Whilst the employee needs to act quickly, care should be taken not to jump the gun and resign too quickly! Finally, an employee who gives longer notice than his/her contractual minimum may lose any subsequent claim for constructive unfair dismissal.

An employee who claims constructive dismissal may complain to an employment tribunal, provided that he/she has the requisite length of service to bring a claim (two years). The maximum award is a basic award (similar to a redundancy payment) plus compensation up to the current maximum limit.

Avoiding constructive unfair dismissal claims

A few tips that may prevent a claim of constructive unfair dismissal:
  1. Ensure that if you propose to make changes to anyone’s terms and conditions, these are fully considered and only implemented after prior consultation and proper notice. Consider very carefully where these changes are not agreed with the employee – are they really justified and necessary?
  2. Check your contracts and amend them for new recruits if you have insufficient flexibility. If you require mobility, flexibility in working for other departments, or flexibility in hours these can be part of the contract and you can therefore rely on these clauses as long as you implement them reasonably.
  3. Encourage staff to use the grievance procedure and act promptly to properly investigate and resolve any grievances.
  4. Take immediate action on any suggestions of harassment or bullying in the workplace and ensure that the alleged victims are given proper and immediate protection. Ensure that you have a policy on bullying and harassment and that managers are trained to implement this and all staff are aware of this. Make it clear what standards of behaviour are unacceptable in your workplace.
  5. Ensure that any disciplinary action taken is fair, consistent with other similar cases, that full investigation is undertaken prior to any decision and that any penalty imposed is in line with your disciplinary procedure.
  6. Ensure that managers and supervisors are properly trained and take advice before embarking on some wonderful new plan to reorganise their departments and “sort out their people problem for once and for all”!

Legal considerations

An employee who feels that they have been unfairly constructively dismissed can bring a claim to an employment tribunal, provided that they have the required qualifying service (two years, inclusive of their statutory notice period).

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