Constructive dismissal is where an employer has committed a sufficiently serious breach of contract that the employee’s only option is to resign in response to the employer’s conduct or treatment.
Constructive dismissal is recognised as being difficult for employees to prove at tribunal.
What is constructive dismissal?
Constructive dismissal applies only in limited circumstances.
The employee will need to show:
- The employer has committed a serious breach of contract (‘repudiatory breach’)
- They felt forced to leave because of that breach, and
- They have not done anything to suggest that they have accepted their breach or a change in employment conditions.
The breach of contract could involve either:
- Breach of an express contractual term eg failure to pay wages, failure to follow an internal policy correctly; or
- Breach of an implied term of contract eg failure to take reasonable steps to protect the health, safety and welfare of employees
The breach of contract can relate to a single serious incident or a series of incidents that are sufficiently serious when taken together, and the breach must have been the reason for the resignation.
The following are examples of employer conduct which may lead to constructive dismissal:
- Allowing others to bully or harass the individual at work
- Making unreasonable changes to how the individual works, for example by forcing them to work longer hours
- Demoting them without reason
- Refusing to pay salary
- Failing to ensure a safe working environment
- Withdrawing contractual benefits eg company car
- Failing to address stress at work
- Failing to make reasonable adjustments where the individual has a disability
When giving notice, the employee should state their reasons for resigning, and that they consider themself as being “constructively dismissed”.
Who can claim constructive dismissal?
To be able to bring a claim for constructive unfair dismissal, the individual must have held employee status at the time they resigned, and have been employed by the employer for at least two continuous years on the date of resignation.
The two-year rule will not apply if the resignation was due to a reason that would be deemed ‘automatically unfair’ (see below) or due to discrimination.
Strict time limits apply for employees to bring a tribunal claim. They have only 30 days less one day of the contract ending to start a claim. They must also first notify ACAS under early conciliation requirement before they can start a claim.
Employees are advised to consider all other options before resigning to claim constructive dismissal, and they are also under a duty to mitigate their losses by trying to find new work as soon as they resign.
What is ‘automatically unfair’ treatment?
Employees who have resigned as a result of being subjected to treatment that is deemed automatically unfair, they may be able to claim for constructive dismissal without requiring two years’ continuous service.
The following behaviours and treatment would be classed as automatically unfair:
- The individual is pregnant or on maternity leave
- They have asked for their legal rights at work, eg to be paid minimum wage
- They took action about a health and safety issue
- They work in a shop and refused to work on a Sunday
- They are a trade union member and took part in trade union activities including official industrial action or they were acting as an employee representative
- They have reported the employer for wrongdoing (whistleblowing)
If the employee resigns after 2 years’ service, it would also be automatically unfair if the reason for terminating the contract was because the business was transferred to another employer or they failed to declare a spent conviction.
Constructive dismissal due to discrimination
Employees are protected under the Equality Act from discrimination relating to a protected characteristic.
If the employee’s resignation was because the employer discriminated against them, they may be able to bring a constructive dismissal claim against the employer.
It could qualify as discrimination if the employee was treated unfairly because they are or are seen to be, or they are associated with someone who is seen to be:
- pregnant or on maternity leave
- from a particular race, ethnicity or country
- married or in a civil partnership
- a man or a woman
- lesbian, gay, bisexual or trans (LGBT)
- have a particular religion or set of beliefs
- older or younger than the people you work with
Can the employee resign without giving notice?
Ordinarily, employees are required to give and work the correct notice when resigning from their job.
In a constructive dismissal scenario, however, where the employer has seriously breached the terms of the employment contract, it is usually justifiable for the employee to resign without giving the requisite notice.
This means they may resign with or without notice, but they should be entitled to resign and terminate their contract without notice.
Should they work their notice period, it may be reasonable for the employer to consider this as proof that the employee has consented to the breach and affirmed their contract by remaining an employee.
Does the employee need to raise a grievance first?
Employees and employers are expected to try and resolve disputes informally and internally before pursuing a tribunal claim.
Depending on the circumstances, it may be appropriate for the employee to raise a grievance and give the employer the opportunity to respond and take action.
The employee may send a ‘Without Prejudice’ letter detailing the contractual breach(es) and reasons for the complaint and inviting the employer to rectify the situation before the employee feels forced to resign.
This provides the employer with the opportunity to address the situation. If the employee is unwilling to respond to any attempts to settle the matter amicably, or an agreement cannot be reached, then the employee will either have the choice of returning to work or to resign and then pursue a case for constructive dismissal.
What will the employee need to show to claim constructive dismissal?
Where possible, employees are encouraged to try and resolve workplace disputes informally with their employer, or through the organisation’s internal grievance procedures. Resigning should always be considered a measure of last resort.
However, where there is an incident involving conduct or treatment by the employer that equates to a breach of contract, the employee should resign as soon as possible, or the employer may argue that they had ‘accepted’ the breach.
The employee should set out their reasons for leaving in a resignation letter.
A common, pragmatic approach where the employee and employer cannot resolve the situation is to agree a negotiated exit with a financial settlement for the employee. Settlement agreements can allow for the matter to be resolved more quickly than in a tribunal, with both parties having to agree to the terms before signing.
When bringing a claim for constructive dismissal, the burden of proof is on the employee to prove that the legal tests have been met.
Constructive dismissal cases are frequently dismissed by tribunals because the employee has been unable to provide a sufficient body of proof to evidence the breach or where the employee has been deemed to have accepted the employer’s behaviour over a prolonged period of time.
Some breaches will be easier to establish than others. A pay dispute, for example, can be evidenced by payslips and bank statements. Breaches relating to trust and confidence, however, can be more challenging to prove and may require the support of emails, text messages, witness statements and any notes you may have taken relating to relevant events or incidents or conversations.
Substantial evidence will be needed to support any case and prove that the breach was fundamental to the contract of employment and left the employee with no alternative than resignation.
The employer can then look to defend their case, which may mean arguing that there was no breach at all and the resignation was voluntary, or that any breach was not sufficiently severe to justify resignation or constitute constructive dismissal and that they behaved in a reasonable manner.
How much is compensation for constructive dismissal?
Compensation for constructive dismissal is made of two parts; a basic award and a compensatory award.
The basic award is set is as follows:
- One and a half week’s pay for each year of employment if you are aged 41 and above.
- One week’s pay for each year of employment if you are aged 22-40.
- Half a week’s pay for each year of employment if you are under the age of 22.
Calculations can apply for up to a maximum of 20 years’ continuous service. The level of pay will usually be set at the employee’s normal weekly gross pay at the time of your resignation, up to the prevailing maximum threshold, £544 for 2021/22.
The maximum compensation limit for unfair dismissal is £89,493. This is in addition to the basic award cap, which is £16,320 (30 weeks’ pay subject to the limit on a week’s pay).
In most cases, constructive dismissal claims do not make it to the tribunal but instead are settled with a compromise agreement. It is important for employees to understand the amount they could potentially be awarded by the tribunal to gauge the level of an acceptable offer.
The compensatory award is set to award employees where it is ‘just and equitable’ based on specific losses arising as a result of their employer’s actions. Types of losses that could be claimed include:
- loss of wages including contractual and non-contractual benefits where applicable
- loss of future wages
- loss of statutory rights
- loss of pension
If the employee’s claim is successful, the tribunal will assess their total loss, and their earnings from alternative employment during the notice period should be taken into account against sums already received from the employer, such as pay in lieu of notice or enhanced redundancy payments.
The tribunal has the power to reduce both the basic award and the compensatory award if the employee’s conduct contributed to the situation, or where an employer can show that even if they had followed a correct process, the decision to dismiss would still have been the same.
How is constructive dismissal different from unfair dismissal?
While constructive dismissal relates to an employee feeling forced to resign because of their employer’s conduct, unfair dismissal applies where the employer cannot show good reason for the dismissal or they have failed to follow a fair and lawful formal disciplinary or process in dismissing the employee.
DavidsonMorris’ team of employment law specialists offer support and advice to employees facing difficulties in the workplace. 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 FAQs
What can be classed as constructive dismissal?
Constructive dismissal only applies where the employers conduct is a serious breach of the employment contract, such as demotion or unlawful deduction from wages.
Is constructive dismissal hard to prove?
It is generally acknowledged that it is difficult for employees to prove constructive dismissal at tribunal. Substantial evidence is required and in most cases, the matter is settled before the tribunal.
What is the maximum payout for constructive dismissal?
The statutory cap is £89,493, or 52 weeks gross salary, whichever is the lower, in addition to the basic award of up to a maximum of £16,320 (30 weeks' pay subject to the limit on a week's pay).
Last updated: 18 March 2021