Constructive Dismissal: What Employers Need to Know

Constructive dismissal claims can catch employers off guard. An employee resigns and then claims they were forced out by your conduct. Understanding how these claims work helps you avoid them.

What Is Constructive Dismissal?

Constructive dismissal is when:

• The employer commits a fundamental breach of contract
• The employee resigns because of that breach
• The law treats this as a dismissal (not a resignation)
• The employee can claim unfair dismissal

Key principle: The employer's conduct must be so serious that it goes to the root of the contract.

The Legal Test

For a constructive dismissal claim to succeed, the employee must prove:

1. There Was a Breach of Contract

The employer breached an express or implied term.

Express terms: Written in the contract. Implied terms: Read into every contract by law.

2. The Breach Was Fundamental

The breach must be sufficiently serious - a "repudiatory breach" going to the heart of the contract.

3. Employee Resigned Because of the Breach

The breach must be the reason (or principal reason) for resigning.

4. Employee Didn't Affirm the Contract

The employee must not have:

• Delayed too long before resigning
• Continued as if accepting the breach

The Implied Term of Trust and Confidence

Most constructive dismissal claims are based on breach of the implied term of mutual trust and confidence.

What It Means

Employers must not:

"Without reasonable and proper cause, conduct themselves in a manner calculated or likely to destroy or seriously damage the relationship of trust and confidence between employer and employee."

Conduct That May Breach Trust

• Unjustified criticism or humiliation
• Bullying or harassment
• Failure to investigate complaints
• Unilateral changes to contract
• Undermining authority
• Excluding from meetings
• Threatening manner
• False accusations

The "Last Straw" Doctrine

A series of actions, each insufficient on its own, can together amount to a breach. The final act (the "last straw") need not be serious itself - it can be the trigger that makes the cumulative effect amount to a fundamental breach.

Example: A pattern of minor criticisms, exclusions, and undermining behaviour over months, culminating in a dismissive comment in a meeting.

Common Trigger Situations

Changes to Terms and Conditions

High risk:

• Reducing pay without agreement
• Changing job role significantly
• Moving work location far away
• Increasing hours substantially

Mitigation:

• Consult properly before changes
• Get agreement in writing
• Give adequate notice
• Consider contractual flexibility clauses

Demotion or Removal of Responsibilities

High risk:

• Taking away key duties
• Reducing status or authority
• Removing team leadership
• Excluding from decisions

Mitigation:

• Have genuine business reasons
• Discuss with employee first
• Follow proper process
• Document reasons

Failure to Address Grievances

High risk:

• Ignoring complaints
• Inadequate investigation
• Not taking action on bullying
• Dismissive response to concerns

Mitigation:

• Have a clear grievance procedure
• Investigate properly
• Take concerns seriously
• Communicate outcomes

Bullying and Harassment

High risk:

• Manager's bullying behaviour
• Failure to stop colleague harassment
• Creating hostile environment
• Victimisation after complaints

Mitigation:

• Clear anti-bullying policy
• Training for managers
• Investigate complaints
• Take action against perpetrators

Pay and Benefits Issues

High risk:

• Late or incorrect pay
• Removing benefits unilaterally
• Changing bonus terms unfairly
• Failing to honour promises

Mitigation:

• Pay correctly and on time
• Follow contractual terms
• Don't make promises you can't keep
• Document any agreed changes

How to Avoid Constructive Dismissal Claims

Good Management Practices

1. Communicate clearly - Keep employees informed
2. Follow procedures - Use proper processes
3. Treat fairly - Consistent treatment
4. Listen to concerns - Take complaints seriously
5. Document decisions - Keep records

When Making Changes

1. Consult before deciding
2. Explain the reasons
3. Consider alternatives
4. Get agreement where possible
5. Give notice of changes
6. Put it in writing

When There Are Problems

1. Address issues early
2. Follow proper procedures
3. Keep records
4. Be fair and reasonable
5. Consider the employee's perspective

Warning Signs

Employee Behaviour

Watch for:

• Formal grievances
• Complaints about treatment
• Requests for changes
• Withdrawal or disengagement
• Seeking advice/documentation
• References to contract terms

Manager Behaviour

Review whether managers are:

• Following procedures
• Treating staff fairly
• Responding to concerns
• Creating paper trails unfairly
• Behaving reasonably

When an Employee Resigns

Immediate Steps

1. Accept the resignation in writing
2. Don't admit anything
3. Note the reasons given (or that none were given)
4. Preserve documents
5. Brief relevant people

If They Claim Constructive Dismissal in Resignation

Their letter may say:

"I have no choice but to resign due to your fundamental breach of contract..."

Your response:

• Acknowledge resignation
• Note their stated reasons
• Don't agree you've breached anything
• Take advice if needed

Defending a Claim

Challenge the Elements

No breach:

• You didn't do what they allege
• Your actions were within the contract
• You had reasonable and proper cause

Not fundamental:

• The breach wasn't sufficiently serious
• Reasonable employer could act this way
• Didn't go to root of contract

Not the reason:

• They resigned for other reasons
• They had another job lined up
• Real reason was something else

Affirmation:

• They delayed too long
• They carried on working as normal
• They didn't treat the breach as ending things

Evidence to Gather

• Contemporaneous documents
• Emails and communications
• Notes of meetings
• Witnesses
• Context and background
• Their conduct after the alleged breach

ACAS Early Conciliation

Process

Before bringing a tribunal claim, the employee must contact ACAS for early conciliation.

Your Opportunity

• Try to resolve the dispute
• Understand their position
• Assess settlement options
• Avoid tribunal if possible

Compensation

If They Succeed

Constructive dismissal is a form of unfair dismissal. Compensation includes:

• Basic award (based on age and service)
• Compensatory award (actual losses, capped)

Mitigation

The employee must mitigate their loss by:

• Looking for new work
• Accepting reasonable offers
• Not unreasonably refusing opportunities

"Resign and Claim" Tactics

What to Watch For

Sometimes employees plan to resign and claim, looking to:

• Build a paper trail
• Create incidents
• Force you into difficult positions

Your Response

• Follow procedures scrupulously
• Document everything contemporaneously
• Don't rise to provocation
• Take advice if you suspect this

Key Points

1. Constructive dismissal requires a fundamental breach - not just unfairness
2. The breach must cause the resignation - not just coincide with it
3. Employees must not affirm - they can't wait too long
4. Trust and confidence is usually the basis - the implied term
5. Prevention is better than defence - good management avoids claims
6. If claim is made, assess carefully - consider settlement if exposure is real

Checklist for Prevention

Ongoing

• Fair and consistent treatment
• Clear communication
• Proper procedures followed
• Grievances taken seriously
• Managers trained

When Issues Arise

• Investigate properly
• Document decisions and reasons
• Consult before changes
• Give employee chance to respond
• Consider their perspective

If Resignation Happens

• Accept in writing
• Note reasons (or absence of reasons)
• Don't admit breach
• Preserve documents
• Take advice if claim indicated