Constructive dismissal: checklist
Claire Bowles of Osborne Clarke continues a series of articles on constructive dismissal with a checklist to help employers avoid constructive dismissal claims. Employers can reduce the likelihood of constructive dismissal claims by adhering to contractual terms and dealing with grievances promptly.
1. Ensure that contractual terms and conditions are clear.
A constructive dismissal occurs when an employer is guilty of conduct that amounts to a significant breach of an employee's contract of employment that goes to the root of the contract, or that shows that the employer no longer intends to be bound by one or more essential terms of the contract. The employee must resign in response to this breach. (See Constructive dismissal: frequently asked questions in this series for more details of the test for constructive dismissal.) A breach of an express or implied term of the contract of employment could lead to a constructive dismissal.
Employers should ensure that contractual terms are clear and unambiguous. By making contractual terms clear, employers can reduce the likelihood of disputes about those terms and constructive dismissal claims arising as a result. Employment relationships are easier to manage if both parties are aware of their rights and obligations, than if they are not. Disputes arise where the employer and employee differ in their interpretation of a contractual clause. Particularly where the clause is a key clause (such as a clause relating to pay or hours) a dispute may escalate into a constructive dismissal claim. Ambiguity in drafting is normally interpreted in favour of the employee. This means that an employer may find that it is liable for a contractual term that it had not intended (for example an obligation to pay a bonus) if a clause is ambiguous. Therefore, employers should ensure that contracts clearly define the terms that attach to their employees' rights and obligations.
Employers should set out their contractual terms in the written statement of employment particulars, which must include certain specified information about employment terms and be given to employees by the end of their second month of service. Details of further contractual terms might be included in other documents, such as the staff handbook, policies and other communications.
2. If flexibility is required, make sure that this is clear in the written terms.
If an employer wishes to have a degree of flexibility in how an employee performs his or her role, it needs to make this clear in the contractual terms. If it fails to do so, and imposes a requirement to be flexible on an employee, he or she may have a claim for constructive dismissal. When drawing up employment contracts employers should consider, for example, whether or not employees may be required to work additional or different hours, work from different locations or be flexible in their duties. If they may, the contract should reflect this.
3. Be aware of potential implied contractual terms.
Not all terms need to be express to be part of the contract. Terms may be implied into a contract by law (such as the mutual term of trust and confidence) or by custom and practice (see Implied terms in the Express and implied contractual terms section of the XpertHR employment law manual for more information).
Employers that breach a key implied term may be liable for constructive dismissal claims. Therefore, employers should be on their guard for terms that may have been implied into employees' contracts. For example, if an employer has paid a Christmas bonus for a number of years, it is likely that, if it withdraws this benefit without the employees' agreement, it will be in breach of contract, regardless of whether or not a right to a Christmas bonus is expressly stated in the contract. The right to receive the bonus will have become an implied term through custom and practice. Similarly, the withdrawal of other rights not expressly provided for, but nonetheless afforded to employees on an ongoing basis (for example car parking facilities), is likely to amount to a breach of contract.
A breach of the implied term to maintain mutual trust and confidence has formed the basis of many constructive dismissal claims. This implied term may be breached by the employer's actions or behaviour where it fundamentally undermines the employee's confidence in the employer's intention to honour the terms of the contract. Examples of the type of conduct that could amount to a breach of the implied term of mutual trust and confidence include: humiliating an employee in public; failing to provide a safe system of work; failing to deal with a grievance; failing to address bullying or harassment; and failing to make reasonable adjustments to accommodate an employee's disability.
4. Exercise flexibility in contracts reasonably.
Many employers rely on flexibility in contract terms, particularly
in relation to job mobility, hours and duties. A contract may contain
flexibility clauses that allow the employer to make changes. However, case law
has implied a term into all contracts that requires employers to use flexibility
clauses in a reasonable manner. In United
Bank Ltd v Akhtar [1989] IRLR 507 EAT, the employee's contract
included a mobility clause allowing the employee "to be transferred temporarily
or permanently to any place of business which the Bank may have in the
In principle, it is possible for an employer to rely on a clause that gives it the right to transfer employees between departments. However, if this is done in such a way that an employee's pay is reduced by a significant degree, this may constitute a breach of the implied term of trust and confidence and give rise to a constructive dismissal (BPCC Purnell Ltd v Webb EAT/129/90).
5. Do not vary terms and conditions without obtaining employees' consent.
Employers may wish to vary employees' terms and conditions (particularly those relating to pay and benefits, hours of work or job duties) for business reasons. However, an employer that does so without first obtaining employees' agreement will be vulnerable to constructive dismissal claims.
The employer should consult with all the employees affected to try to obtain their individual consent to the change. The employer should document the consultation process and rely only on written consent to the change as evidence that the employees have given it.
The consultation process should be genuine. An employer that tries to force through a change, particularly through behaviour that is akin to bullying, is likely to be guilty of conduct amounting to constructive dismissal. If a change cannot be agreed it may be necessary to dismiss (with notice) and re-employ employees on the new terms. The collective redundancy process may apply in these circumstances if 20 or more employees are affected (see the Informing and consulting prior to redundancies section of the XpertHR employment law manual for more details). There is also a risk that dismissed employees will bring unfair dismissal claims.
Even if the employer has expressly reserved its right to make changes to the contract, it is safer for it not to enforce these changes unilaterally, but to negotiate agreement instead.
6. Make employees aware of how they should treat each other.
Employees who are subjected to bullying or harassment at work are likely to have good grounds to bring a claim of constructive dismissal if their employer has taken no steps to prevent it and/or fails to address it. Employers should ensure that they have comprehensive policies and procedures covering dignity at work, equal opportunities and whistleblowing. These should clearly set out the behaviour that the employer expects from its employees and how it will address conduct that breaches its requirements. The disciplinary and grievance procedures should reinforce the employer's message.
As well as having comprehensive documentation, employers should ensure that employees are aware of what is required of them by training them on their rights and obligations under the relevant policies and procedures. Employers should deal with employees who breach the requirements of their policies through the disciplinary procedure, consistently and fairly.
7. Train managers in avoiding and dealing with potential constructive dismissal situations.
Employers should equip managers with the skills that they need to deal with situations that could lead to constructive dismissal claims. For example, managers should be trained in handling grievances, giving constructive feedback to employees about work performance and managing relations with and between employees.
8. Have a clear grievance procedure.
Grievance procedures give employees the means of raising issues before they get out of hand and develop into a fundamental breach of contract. Once a grievance is raised, the employer can address it. A grievance procedure should clearly set out how employees should raise grievances and to whom (which should also be notified on the written statement of terms of employment) and the procedure that the employer will follow to investigate and address grievances. The grievance procedure should comply with the requirements of the Acas code of practice on disciplinary and grievance procedures (PDF format, 1.58MB) (on the Acas website). Although a failure to follow the code will not, in itself, render an employer liable for a constructive dismissal claim, if the employee brings a claim it could lead to an uplift of up to 25% in any compensation that the employment tribunal awards.
9. Take employee complaints seriously and deal with them quickly.
Employers should be prepared to take complaints and grievances seriously and deal with them in a timely manner. In WA Goold (Pearmak) Ltd v McConnell and another [1995] IRLR 516 EAT, the EAT held that it is an implied term of the contract of employment that employers will reasonably and promptly afford employees an opportunity to obtain redress of grievances. By failing to address a grievance, an employer risks compounding the initial trigger for a potential constructive dismissal with its own failure to address the matter. The Acas code sets out the basic requirements for handling grievances, including a requirement for employers to "arrange for a formal meeting to be held without unreasonable delay after a grievance is received". If the employer delays in addressing an employee's grievance, in the event of a claim, this could result in the employment tribunal making an uplift of up to 25% on any award that it makes.
The final article in this series will be a case study around constructive dismissal claims and will be published on 19 December.
Claire Bowles (claire.bowles@osborneclarke.com) is a solicitor in the employment team at Osborne Clarke.
Further information on Osborne Clarke can be accessed at www.osborneclarke.com.
