Constructive dismissal is when an employee resigns because their employer breached an important term of the employment contract. This is often confused with “unfair dismissal,” which is when the employer terminates the employment contract. There are “implied” terms in employment contracts, which means they continue to apply during the employment relationship, even if they are not written into the contract.
If you think your employer has (or plans to) breach an important term of your contract, it is important to take advice quickly. If you wait too long you may weaken your claim, but your actions should be balanced with the fact you are in a better position to negotiate if you remain employed. This can be a fine balance and we suggest you discuss it with an experienced employment lawyer quickly and before making any big decisions.
We routinely help people that find themselves in a constructive dismissal situation and there are ways to make the best of a bad situation or fix the issues.
What is Constructive Dismissal?
Formally Constructive Unfair Dismissal, falls within the definition of a dismissal under section 95(1) of the Employment Rights Act 1996:
It is defined as arising where the employee terminates their employment contract, with or without notice, in circumstances in which they are entitled to terminate it without notice by reason of the employer’s conduct.
The key difference between “unfair dismissal” is that with constructive dismissal the employee resigns and with an unfair dismissal the employer dismisses the employee. In a constructive dismissal claim, the burden of proof is on the employee, in an unfair dismissal claim, the burden of proof is on the employer.
The phrase constructive dismissal is not referred to in statute (in this case the Employment Rights Act 1996) but is a colloquial label.
Constructive dismissal is a complex area and what is set out below is a brief introduction.
Who can claim Constructive Dismissal?
To be eligible to claim constructive dismissal:
- You must be an employee
- Have at least 2 years continuous service
- Unless one of the exceptions apply, known as automatically unfair dismissals.
When is there a Constructive Unfair Dismissal?
The following elements are needed to establish constructive dismissal.
(1) A fundamental breach of contract (also known as a repudiatory breach). This can be an actual or anticipatory breach” and can arise from a single act or a series of act. It must be sufficiently serious to justify the employee resigning. Some common examples are:
- Failure to pay.
- Failure to provide a safe working environment.
- Changes to your working terms and conditions.
- Not adequately dealing with a grievance.
- A demotion.
- Constant unfair criticism or demeaning behavior.
- Bullying or discriminating or turning a blind eye to this conduct.
(2) The employee must accept there was a breach and treat the contract as ended. The employee must resign in response to the breach.
(3) The employee must not delay too long or they may be deemed to have waived or “affirmed” the breach. The period of acceptable delay depends on the overall circumstances and nature of the alleged breach.
In summary, there must be a fundamental breach of contract, that causes an employee (with 2 years’ service, unless an exception applies) to resign, and they don’t delay too long before resigning.
What should I do if I think my employer has committed a fundamental breach of contract?
Don’t resign. Take advice. Act quickly.
This sounds counterintuitive, because to preserve the constructive unfair dismissal claim, you must resign and do so quickly. Taking too long to receive professional advice may not be sufficient to justify the delay in resigning.
However, (1) you need to make sure the employer’s conduct was serious enough to amount to a fundamental breach of contract and (2) even if it was, you are in a much better position to negotiate if you remain employed.
If you resign first, then take advice and obtain representation, it is still difficult to obtain compensation when the employee has left the business without first presenting a Tribunal claim (the main downside here (the Tribunal route), is it can take a long time (potentially years), and potentially lots of effort and money before you receive compensation – you may also lose the claim and be awarded nothing).
If you remain employed then take advice and obtain representation, you will (generally) be in a much stronger position to negotiate an exit, meaning you can obtain compensation quickly without the need (and associated risks) to present a Tribunal claim.
As said (although it bears repeating), you must act quickly, because if you wait too long, you run the risk of losing the constructive unfair dismissal claim (see above, if you wait too long, you may waive the fundamental breach of contract).
Are there any other Tips when potentially faced with a Constructive Dismissal?
- As said above, but worth repeating – don’t resign, take advice, do so quickly. There are potential ways to buy time so you can keep your options open, which can be explored if you take advice.
- Before taking advice, have your evidence ready.
- In terms of evidence, keep detailed notes/documentary evidence of the treatment that you think is a fundamental breach of contract, but don’t breach any internal rules/terms of your contract in the process (for example, forwarding emails from your work email to your personal email may seem like a good idea, but this may lead to disciplinary action).
- Decide if you want to stay employed or exit the business.
- If you want to stay, you can take advice / consider how best to resolve the issue.
- If you want to leave, you can take advice on how to exit on the best terms possible.
If you are having issues at work, these articles may help you:
Frequently Asked Questions About Constructive Dismissal
1. What is constructive dismissal?
Constructive dismissal occurs when an employee resigns (without delay) because their employer has breached an important term of the employment contract This is different from unfair dismissal, where the employer terminates the employment.
2. What constitutes a fundamental breach of contract by an employer?
A fundamental breach of contract can take many forms, but some examples include:
- Failure to pay wages
- Failure to provide a safe working environment
- Unilateral changes to working terms and conditions
- Not adequately dealing with grievances
- Demotion without cause
- Persistent unfair criticism or demeaning behaviour
- Bullying or discrimination, or ignoring such conduct
3. Who is eligible to claim constructive dismissal?
To claim constructive dismissal, you must:
- Be an employee (not a worker, contractor or freelancer).
- Have at least 2 years of continuous service.
4. What should I do if I believe my employer has breached my contract?
- Do not resign immediately. Instead, take legal advice quickly.
- Ensure the employer’s conduct was serious enough to amount to a fundamental breach of contract.
- Understand that you may be in a stronger position to negotiate an exit if you remain employed.
5. Can I claim constructive dismissal if I delay resigning?
Delaying your resignation can weaken your claim. If you wait too long after the breach, it may be considered that you have accepted (or “affirmed”) the breach, thus losing your right to claim constructive dismissal.
6. What is the process for claiming constructive dismissal?
- Identify and document the fundamental breach of contract.
- Resign promptly in response to the breach.
- Seek legal advice immediately to evaluate and support your claim.
- Consider negotiating an exit package before resigning to maximise compensation without prolonged litigation.
7. Are there any exceptions to the 2-year service requirement for constructive dismissal claims?
Yes, exceptions include cases of automatically unfair dismissal, such as dismissals related to family reasons (e.g., pregnancy, maternity leave), health and safety reasons, whistleblowing, and others listed under the Employment Rights Act 1996.
8. What types of evidence should I gather to support my constructive dismissal claim?
- Keep detailed notes of incidents and breaches.
- Collect documentary evidence such as emails, written communications, and official documents.
- Ensure you do not breach any internal policies while collecting evidence (e.g., do not forward company emails to your personal account without permission).
9. What are my options if I want to stay employed but address the issues?
- Seek legal advice on how best to resolve the issues while remaining employed.
- Explore internal grievance procedures or mediation options.
- Consider any potential ways to negotiate improvements to your working conditions.
10. Can I negotiate an exit with compensation without going to a Tribunal?
Yes, with legal advice and representation, you may be able to negotiate an exit package that includes compensation without the need to file a claim with the Employment Tribunal, thus avoiding the time, effort, and uncertainty of litigation.
Disclaimer:
The above is for information purposes only. Nothing should be relied upon as a substitute for legal advice and nothing written should be construed as legal advice or perceived as creating a lawyer-client relationship.