What is constructive dismissal?

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The term “constructive dismissal” is sometimes mentioned in conversations, but many are not really aware of what it is and its significance in the context of employment-related claims.

What does a dismissal actually mean?

A dismissal is where an employer terminates the employment of an employee. The employer will usually formally terminate the employee’s employment with or without notice.

Constructive dismissal is a form of dismissal. Employment law has developed the concept of constructive dismissal which refers to the situation where an employee resigns as a result of a serious breach of fundamental terms of their employment contract by their employer. The significance of a finding of constructive dismissal is that it can lead to a subsequent Employment Tribunal claim such as unfair dismissal or wrongful dismissal (essentially breach of contract) being lodged by the employee.

What are your employment contract terms

Employment contract terms can be express (i.e. written) or implied.

Examples of breach of fundamental express terms can include a unilateral reduction of pay, a significant change in job duties or place of work, or manifestly unreasonable disciplinary proceedings. In the recent Employment Appeals Tribunal decision of Mostyn -v- S and P Casuals Ltd (2017), the employer was found to have constructively dismissed the employee by unilaterally deciding to reduce his salary from £45,000 to £25,000 following a decline in sales by the employee.

Implied terms on the other hand are incorporated into every employment contract by caselaw that has developed over time. An important implied term is mutual trust and confidence between employer and employee. If a party conducts themselves in a way that destroys or seriously breaks down the relationship of trust and confidence, the other party may be entitled to treat the contract as terminated.

So, is it constructive dismissal?

For the circumstances to amount to a constructive dismissal, certain tests must be met:

The claimant must be an employee (not worker or contractor)
The employer must have breached a fundamental term of the contract
The employee must resign in response to that breach (with or without notice)
The employee cannot not delay too long before resigning (otherwise they might be regarded as accepting the breach).

It may not always be one decisive act of the employer that compels the employee to resign. A series of small breaches which, taken cumulatively, amount to a breach of the implied term of trust and confidence may also amount to constructive dismissal, known as the “last straw” doctrine. In Craig -v- Abellio Ltd (2022), the employee had a dispute with the bus company Abellio over sick and holiday pay. He was subsequently awarded over £6,000 in backpay, which was not paid on time. Mr Craig then resigned and was found to have been constructively dismissed, with the failure to make payment on time being one of a string of mistakes made by his employer.

Such cases highlight the need for employers to treat grievances with appropriate seriousness and to have regard for express and implied contract terms, especially where changes are to be introduced.

If you need advice on constructive dismissals then contact Kumsal Kaleli and the team today.