Constructive Dismissal - A Guide for Employers

When running a business, one of your legal responsibilities is to provide a fair and reasonable work environment.

This means you cannot change elements of an employee's working life without prior consent. Or, act contrary to the implied term of mutual trust and confidence in your employment contract.

Doing so could mean a breach of contract occurs, and staff could raise a constructive dismissal to an employment tribunal. Consequently, your business might be required to pay damages.

In this guide, we'll discuss what constructive dismissal is, actions that may lead to it, and how a tribunal could award your employees.

What is constructive dismissal?

Constructive dismissal is when an employer makes alterations to someone's employment in such a way that they have no choice but to resign. Or they behave in a way which is contrary to the implied term of mutual trust and confidence in their employment contracts.

This is due to a fundamental breach of their employment contract. The breach can be a single serious event, or a series of incidents over a longer period.

For a constructive unfair dismissal claim to proceed to an employment tribunal, there needs to be a fundamental breach of either:

• The express terms of an employee's employment contract or,
• The implied terms. One of which is mutual trust and confidence from both parties in the employment relationship.

What is the difference between constructive and unfair dismissal?

The main difference between constructive and unfair dismissal is how an employee leaves the business.

Although constructive dismissal is a form of unfair dismissal, it ends when an employee resigns as a result of a repudiatory breach by the employer.

Whereas with an unfair dismissal, an employer will terminate their employment in a way that's deemed unlawful.

Constructive dismissal examples

For a dismissal to be constructive, there needs to be a serious breach of the employment contract due to the employer's actions. For example, if an employer fails to prevent an employee from being harassed or bullied.

Constructive dismissal can also occur in the following ways:

Intolerable working conditions

A common example of constructive dismissal is when you make unreasonable changes to an employee's working conditions, such as:

• Patterns.
• Job description.
• Place of work.

When wanting to make changes to an employee’s working conditions, you should first try to seek an agreement with an employee.

Lack of payment

Withholding wages is another way you could face constructive dismissal claims. Once a salary is agreed upon, this is considered an express term in an employment contract under UK employment law.

So, they should never be changed without the employee's consent. If you do, it could lead to a staff member resigning and claiming constructive dismissal at an employment tribunal.

Employer's conduct

Another example of actions that could lead to someone being forced to resign from their job is the conduct of you, the employer. As the business owner, it's on you to ensure all your employees feel safe, welcome, and part of your company.

Failure to do so could lead to you being liable for future claims of constructive dismissal. Below are examples of these actions:

• Unfairly accusing the employee of poor performance.
• Failure to provide safe working conditions.
• Failure to act upon claims of bullying or poor workplace conduct.
• Denying development opportunities that other employees have access to.
• Allowing discrimination to take place.
• Treating an employee differently because they're part of a trade union.
• Creating a toxic workplace culture within the business.

Can a breach of contract ever be justified?

No, typically a breach of contract cannot be justified.

However, you might be able to argue that the actions do not amount to a repudiatory breach of the contract.

The employment tribunal then decides whether the action or decision made by the employer is a breach of contract.

Can anyone claim constructive dismissal to an employment tribunal?

No, not everyone can make a constructive dismissal claim to a tribunal. Only employees are eligible to do so.

This means agency workers, self-employed people, and people who weren't guaranteed any work cannot make a claim.

However, this doesn't mean you can treat them any differently or conduct yourself in a way that may make them resign from their job.

How long does someone need to be employed to make a constructive dismissal claim?

To claim constructive dismissal, the employee usually needs to have at least two years of service. This includes any statutory notice period worked.

However, there are some instances where two years of service isn't required to make a claim.

These are:

• Whistleblowing: Where an employee has made a protected disclosure.
• Automatically unfair dismissal: This occurs when a dismissal violates an employee’s statutory legal rights.
• Discrimination: Where an employee is treated differently and unfairly due to holding a protected characteristic, such as their age.

How long do employees have to make constructive dismissal claims?

If an employee feels they've been constructively dismissed from their role, they may choose to raise a claim to an employment tribunal.

To do so, they must make their claim within a period of three months and one day less from when they left their employment.

Their claim must be made with ACAS as a preliminary step under their early conciliation scheme.

How easy is it to prove constructive dismissal?

Constructive dismissal isn't easy to prove, and the burden of proof in constructive dismissal cases lies with the employee.

For an employee's case to be successful, they need to be able to prove that following the actions of the employer, their position in the company became untenable.

The tribunal will establish all the facts surrounding your actions, and determine whether they had a direct effect on the employee and their role.

Can a claim for constructive dismissal be avoided by upholding a grievance or apologising?

No, you cannot rely on an apology and a grievance being upheld to prevent an employee from claiming constructive dismissal.

Once a grievance has been raised by an employee, you should investigate whether there is justification or not.

If there isn’t, you should put measures in place to stop these actions from happening again. But following the grievance and the employee's resignation, they might still be able to make a claim.

Can you negotiate a settlement agreement with an employee to avoid a claim?

You may choose to offer the employee a settlement agreement to hopefully avoid an employee making a constructive dismissal claim.

Settlement agreements are used to end an employment relationship in a way that both parties agree. If the employee agrees to a settlement, they can no longer make the claim to an employment tribunal.

If successful, this means you'll pay the employee a lump sum package. However if you're looking to take this option, you should seek independent legal advice to ensure you're taking the right steps.

What happens if constructive dismissal claims are successful?

If an employee's constructive dismissal claim is successful, they can be awarded a range of compensation. It's important you take each claim seriously, as it could end up costing you financially.

At the start of the claim process, your employee will make clear which award they'd prefer. So it’s important to become familiar with them.

Let's discuss them in more detail:

Reinstatement

Reinstatement means the employee returns to the role they held before they chose to resign. If they win this award, they'll probably be awarded a small amount of compensation as well.

However, most employees who resign from their role at a company don't want to return and will seek new employment elsewhere.

Re-engagement

Re-engagement means the employee returns to work for the company but in a different role to the one they held before.

As with reinstatement, they'll typically be awarded some small compensation as well. This type of award is usually held for employees who work for a large company.

Basic award

A basic award is a statutory payment that is based on an employee's age, current salary, and length of service. If the employee wins a basic award, the tribunal would calculate the total based on the employee's weekly gross pay at the time their employment ended.

The amount awarded is calculated by the following:

• After the age of 41: One and a half week's pay for each year of employment.
• Between the ages of 22 and 40: One week's pay for each year of employment.
• Under the age of 22: Half a week's pay for each year of employment.

From April 2023, this can be a minimum of £643. The maximum total basic award an employee can receive is £19,920, but this doesn't include any overtime pay.

Compensatory award

A compensatory award is a larger amount than a basic award. This is essentially the amount of money the employee lost because they had to leave their job - and were out of work for some time.

From April 2023, the maximum amount an employee can be awarded for this is a one-year salary or £105,707 - whichever amount is lower. The employee will need to provide detailed records of any efforts made to try and find a new role since leaving your company.

Get expert advice on constructive dismissal with Peninsula

You have a legal responsibility to provide a comfortable and safe working space for all your employees to thrive in. Not doing so can make your staff consider resigning from their role.

Allowing this to happen is a breach of contract and should be avoided at all costs. Any employees who resign because of your actions may raise a constructive dismissal claim to an employment tribunal, which could mean you have to pay financial compensation.

Peninsula offers professional constructive dismissal advice. Our teams offer 24/7 HR advice which is available 365 days a year. We take care of everything when you work with our HR experts.

Want to find out more? Contact us on 0800 028 2420 and book a free consultation with an HR consultant today.