Constructive dismissal: a guide for employers

Michelle Landy throws some light on this widely misunderstood area, and gives pointers on how to prevent claims

Constructive dismissal is where an employee resigns and shows they were forced to do so by the conduct of their employer. Without strict rules in place this would be a ‘universal excuse’ for resigning, but constructive dismissal claims are notoriously difficult for employees to win. This doesn’t mean they shouldn’t be taken seriously, particularly given that the recent ban on employment tribunal fees means it no longer costs anything to issue a claim.

An employee may only bring a claim for constructive dismissal if they have a qualifying period of service of two years’ continuous employment. The steps leading to a constructive dismissal claim are:

  1. The employer commits a ‘repudiatory breach’ of the contract of employment.
  2. The employee resigns in response to this breach. The resignation may be with or without notice, but it is usually expected that the employee would resign without notice if they claim their contract has been breached in such a serious way that they cannot reasonably be expected to continue working.
  3. The employee does not delay in resigning. If the employee does delay it can be argued that they have ‘affirmed’ the breach and therefore cannot claim constructive dismissal.

Unfair dismissal and constructive dismissal claims can overlap, as both will involve a fundamental breach of the employment contract by the employer. The difference is that with unfair dismissal the employer dismisses the employee, while with constructive dismissal the employee resigns in response to the breach.

Repudiatory breach

The repudiatory or fundamental breach of an employee’s contract must be so serious – going to the ‘root of the contract’ – that it justifies the employee resigning. Examples of such breaches include:

  • Unilateral changes to the employee’s contract; for example, pay cut or demotion.
  • Changes to the employee’s working hours.
  • Change of the employee’s working location.
  • Changes to the employee’s duties: many constructive dismissal cases are brought on the basis that the employer made unreasonable demands of the employee, which may be construed as setting the employee up to fail in their job role, and/or seeking to elicit the employee’s resignation.
  • Subjecting the employee to unlawful discrimination to the extent that the employee-employer relationship breaks down.
  • Breaches of the implied duty of ‘mutual trust and confidence’ in the contract of employment.

The repudiatory breach doesn’t have to be a single significant incident but can be a course of conduct by the employer that cumulatively has the effect of making the employee’s employment untenable. The final act that triggers the resignation is normally referred to as the ‘last straw’. This doesn’t need to be serious enough to cause a resignation on its own but, taken along with the other events, the employee can treat this as the ‘straw that broke the camel’s back’.

To be effective for constructive dismissal claims, the employee’s resignation letter should unequivocally set out the reasons for their resignation. If it doesn’t, the employee will find it difficult to prove later that it was solely down to the repudiatory breach.

The resignation

A common stumbling block for constructive dismissal claims is a delay in the employee resigning. It isn’t considered reasonable to resign in response to an incident that occurred some six months previously unless there is the ‘course of conduct’ mentioned above leading to the final straw (for example, continued poor treatment by the employer).

The general principle is that if the employee continues to work without complaint, they are deemed to have accepted the breach and affirmed their contract so they will not be entitled to resign later and claim constructive dismissal. There isn’t a strict timescale as to what constitutes working without complaint and it will depend on the circumstances. Some judges have ruled that not walking out immediately bars a claim, while in other cases a longer period has been allowed.

Preventing claims

Constructive dismissal claims are technically difficult to win, but employers should take them seriously to avoid time, money and effort being spent on unnecessary claims.

The key to preventing claims is to avoid the repudiatory breach of contract. This splits into two areas: avoiding the breaches of express terms such as pay, job location, working hours and duties; and avoiding breaches of the implied term of trust and confidence.

Employers sometimes need to change employment contracts and T&Cs to ensure the proper operation of the business. This is acceptable under employment law but it’s important to do it properly. Options available include imposing changes unilaterally, issuing new contracts and the nuclear option of firing and re-hiring. Which one is right is dependent on the circumstances and legal advice should be taken on how to deliver change in a way that minimises issues and gets agreement from the workforce in advance. Don’t assume a small change will just be ok; employees have different ideas about what is important and they may mentally add up several small issues to make a big one – the proverbial ‘last straw’.

Implied term of trust and confidence is usually breached through poor treatment, discrimination or failure to investigate complaints or grievances. Employers that look after their employees and have proper processes in place to prevent workplace discrimination will find these claims easier to resist.

Organisations should have an up-to-date employee handbook and staff policies. This should include an equal opportunities and non-discrimination policy, which should be communicated at induction with regular reminders given. A written grievance procedure gives employees the chance to address issues and all grievances should be dealt with in accordance with the procedure. Training managers on how to identify and resolve problems is also important.

Michelle Carmel Landy is a solicitor at Backhouse Solicitors