What an Employer Should Know About Constructive Dismissal in England

As an employer, it is essential you know what constructive dismissal is and how to avoid it. Constructive dismissal refers to situations where your employee resigns and ends the employment relationship as they feel they have no other option. Accordingly, the employee may pursue legal action through a constructive dismissal claim. This can result in you paying your former employee compensation and could damage your reputation as an employer and as a business. This article will explain what you, as an employer, need to know about constructive dismissal. It will explain what it is, its repercussions, and how to avoid it.

What is Constructive Dismissal?

Constructive dismissal is when your employee resigns rather than when you actively dismiss them. They resign because they feel forced to due to their belief that you have broken their employment contract. The breach of an employment contract must be a serious one and could either be a one-off breach or multiple breaches that together make a serious breach. It could be a breach of an express term or an implied term of the employment contract. Constructive dismissal is not simply a result of unreasonable behaviour. 

Due to the breach, your employee has the right to consider themselves dismissed from employment with you as the work environment has become too difficult to continue working in. Accordingly, resigning becomes their only option.

Some examples of what might be a serious breach of an employment contract leading to constructive dismissal include:

• regularly not paying your employee the correct amount of pay with no fair justification;
• bullying or discriminating against an employee;
• telling an employee they are performing poorly with no evidence to back your claims;
• not following health and safety laws in your employee’s workplace;
• failing to make reasonable adjustments for an employee with a disability;
• withdrawing contractual benefits from employees; 
• failing to deal with grievances an employee raises; or
• making unreasonable changes to your employee’s working times without securing their agreement.

Repercussions of Constructive Dismissal

A claim for constructive dismissal needs to show that:

• you have seriously breached the employment contract;
• your employee resigns as a result of this; and
• your employee resigns without delay after the breach.

Claiming constructive dismissal means that your employees are taking legal action against you. They may have a case for an employment tribunal, and you may need to pay them compensation if they win. This may include loss of:

• wages;
• future wages; and
• effects, such as medical insurance.

Generally, successful constructive dismissal claims are rare in employment tribunals. Nevertheless, you should take potential claims for constructive dismissal seriously. 

How To Avoid Constructive Dismissal

The best advice to avoid a claim for constructive dismissal by one of your employees is to carry out good practices as an employer. This includes abiding by your legal obligations to avoid a situation where you seriously breach your employee’s employment contract. This may include:

• treating your staff fairly;
• thinking before changing terms in an employment contract;
• obtaining the employee’s agreement to changes to employment contract terms;
• ensuring your workplace policies and procedures are in place and accessible; and 
• keeping up to date with employment law.

If you find yourself in a situation where your employee is considering resigning based on constructive dismissal, they may first raise the issue informally. As an employer, you should try to deal with the matter informally or through grievance procedures to resolve it and avoid a claim for constructive dismissal.

When you and your employee cannot resolve the issue, you may decide to make a settlement agreement with them. This is an agreement between you and your employee to end the working relationship amicably. Once employees sign a settlement agreement, they cannot claim constructive dismissal. 

Important Factors

Some valuable points to note about constructive dismissal include:

• claims are usually made by employees; 
• a member of staff can usually make a claim for constructive dismissal after at least two years of employment; 
• your employee can only make a constructive dismissal claim within three months from their final day of employment;
• employees must contact Acas before they claim constructive dismissal;
• it does not matter if you did not intend to breach the employment contract for the possibility of a claim for constructive dismissal; and
• where your employee resigns due to constructive dismissal, they usually do not need to give you any notice.

Key Takeaways

On the whole, employers should be careful to avoid constructive dismissal claims. You may potentially lose a valuable employee and have to pay compensation. Constructive dismissal results from you seriously breaching your employee’s employment contract through not paying them the correct wage without a good reason or bullying them. Therefore, you can avoid this by acting fairly and abiding by your legal employment obligations. If your business does face a constructive dismissal claim, it is best to deal with this informally or through your disciplinary and grievance procedures. 

If you need help understanding constructive dismissal in England, our experienced employment lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. So call us today on 0808 196 8584 or visit our membership page.

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