Constructive Dismissal

Constructive dismissal refers to a situation in which an employee resigns due to their employer’s conduct, which has made continued employment intolerable. Although the employee formally resigns, the law treats this as a dismissal because the employer’s behaviour effectively forced the resignation. This concept is an important element of employment law in the United Kingdom and other Commonwealth jurisdictions, offering protection to workers who are subjected to unfair treatment at work.

Legal Definition and Framework

In British employment law, constructive dismissal is defined under Section 95(1)(c) of the Employment Rights Act 1996. It occurs when an employee resigns “in circumstances in which they are entitled to terminate the contract without notice by reason of the employer’s conduct.” This legal definition establishes that the employee must demonstrate that the employer’s behaviour amounted to a fundamental breach of contract.
A breach of contract in this context may involve either explicit terms—those written or stated in the employment agreement—or implied terms, such as the implied term of mutual trust and confidence. The latter means that neither party should behave in a manner likely to destroy or seriously damage the relationship of trust between employer and employee.
For a claim of constructive dismissal to succeed, three main elements must usually be established:

• There was a fundamental breach of the employment contract by the employer.
• The employee resigned in response to that breach.
• The employee did not delay too long before resigning, as doing so might be seen as having accepted the employer’s conduct.

Common Grounds for Constructive Dismissal

Constructive dismissal claims arise from a variety of situations where employers fail to uphold contractual or legal obligations. Common examples include:

• Significant reduction in pay without the employee’s consent.
• Demotion or change in duties that undermines the employee’s role or professional status.
• Bullying or harassment that is not addressed adequately by management.
• Unreasonable changes in working conditions, such as relocation or altered hours without agreement.
• Failure to provide a safe working environment or to take employee grievances seriously.
• Unjustified disciplinary action or undermining of authority in front of colleagues.

In such cases, the employee’s resignation is treated as a response to intolerable working conditions, amounting to a constructive dismissal.

Legal Tests and Burden of Proof

Constructive dismissal claims are not automatically successful upon resignation. The employee bears the burden of proof to show that the employer’s conduct was serious enough to constitute a repudiatory breach. Courts and employment tribunals often apply the “last straw” doctrine, where a series of minor incidents collectively amount to a final act that forces the employee to resign.
The test for constructive dismissal is both subjective and objective:

• Subjective in determining whether the employee felt compelled to resign because of the employer’s behaviour.
• Objective in assessing whether a reasonable person in the same circumstances would have felt forced to resign.

Key judicial precedents, such as Western Excavating (ECC) Ltd v Sharp (1978), established that the employer’s conduct must amount to a fundamental breach going to the root of the contract, rather than simply being unreasonable or unfair.

Remedies and Compensation

If a claim of constructive dismissal is successful, the employee is treated as having been dismissed and may pursue remedies similar to those available for wrongful or unfair dismissal. The primary remedies include:

• Reinstatement or re-engagement (though rarely ordered in practice).
• Compensation, which is divided into:
  • Basic award: calculated based on age, length of service, and weekly pay.
  • Compensatory award: reflecting actual financial losses, such as loss of earnings or benefits.

The compensatory award is capped by statutory limits, though in some cases, such as discrimination claims, additional compensation may be sought under separate legislation.

Employer Defences and Preventive Measures

Employers can defend against constructive dismissal claims by demonstrating that:

• The conduct complained of did not amount to a breach of contract.
• The employee did not resign because of the alleged breach.
• The employee delayed resignation, implying acceptance of the new conditions.

To prevent potential claims, employers are advised to:

• Maintain clear grievance and disciplinary procedures.
• Communicate any contractual or organisational changes transparently.
• Uphold fair treatment and respond promptly to workplace complaints.
• Provide appropriate management training to avoid breaches of trust or confidence.

Relationship with Unfair Dismissal

Constructive dismissal is closely linked with unfair dismissal, but the two are distinct. While unfair dismissal involves the employer directly terminating employment without a fair reason or procedure, constructive dismissal arises when the employee resigns because of the employer’s conduct.
Once constructive dismissal is established, the employee can further claim that the dismissal was unfair if the employer’s breach had no fair justification. However, to bring such a claim, the employee must normally have completed at least two years of continuous service, unless the case involves discrimination or other automatically unfair reasons (such as whistleblowing).

Impact and Significance

Constructive dismissal plays a crucial role in maintaining fairness within the employment relationship. It protects employees from coercive or exploitative workplace practices by ensuring that employers remain accountable for their behaviour. It also reinforces the importance of mutual respect, trust, and good faith as the foundation of modern employment contracts.