Constructive dismissal: frequently asked questions
Anna Chamberlain of Osborne Clarke begins a series of articles on constructive dismissal with some frequently asked questions that consider, among other things, who can claim constructive dismissal and the circumstances that might lead to a constructive dismissal.
What is constructive dismissal?
Under s.95(1)(c) of the Employment Rights Act 1996, an employee is treated as dismissed if he or she "terminates the contract under which he [or she] is employed (with or without notice) in circumstances in which he [or she] is entitled to terminate it without notice by reason of the employer's conduct". A dismissal in this situation is referred to as a "constructive dismissal".
In Western Excavating (ECC) Ltd v Sharp [1978] IRLR 27 CA, the Court of Appeal set out the requirements for there to be a constructive dismissal. The employer must be guilty of conduct that amounts to a significant breach of the 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. This is often referred to as a "repudiatory" breach of contract. Consequently, the employee is entitled to treat him- or herself as discharged from any further performance of the contract. He or she can accept the breach and terminate the contract by resigning in response to the employer's conduct. This will amount to a constructive dismissal.
The employee must not delay for too long before resigning in response to the employer's breach as this will have the effect of affirming the contract.
What type of behaviour by an employer could entitle an employee to claim constructive dismissal?
For an employee to be able successfully to claim constructive dismissal, the employer must be in repudiatory breach of an express or implied term of his or her contract of employment. Whether or not the breach is sufficiently serious to be deemed repudiatory is a question of fact and degree.
In Morrow v Safeway Stores plc [2002] IRLR 9 EAT, the Employment Appeal Tribunal (EAT) indicated that, where the implied duty of trust and confidence has been broken, this will "inevitably" be serious enough to constitute a repudiatory breach.
Examples of employer behaviour that could constitute a repudiatory breach of contract allowing an employee to resign and claim constructive dismissal include: a unilateral reduction of salary (Industrial Rubber Products v Gillon [1977] IRLR 389 EAT); a variation of terms and conditions of employment without contractual authority or the employee's agreement, for example by changing his or her contractual duties (Hilton v Shiner Ltd Builders Merchants [2001] IRLR 727 EAT); discrimination against an employee (Shaw v CCL Ltd EAT/0512/06); failure to address a grievance (WA Goold (Pearmak) Ltd v McConnell and another [1995] IRLR 516 EAT); the abuse and bullying of an employee, either by the employer or by employees where the employer fails to take appropriate action (Horkulak v Cantor Fitzgerald International [2003] IRLR 756 HC); and inept handling of disciplinary matters (Working Men's Club And Institute Union Ltd v Balls EAT/0119/11).
One situation that does not necessarily amount to the employer
being in repudiatory breach of contract is where it and the employee are
genuinely in dispute about the terms of the contract (Financial Techniques (Planning Services) Ltd
v Hughes [1981] IRLR 32 CA). Also, a delay in paying salary does not always
give grounds for a constructive dismissal claim. In
An employer that is dealing with poor performance or misconduct issues in a rigorous manner will not be in repudiatory breach of contract provided that the procedures that it follows are fair and it treats all employees in the same manner.
Who can claim constructive dismissal?
To be able to bring a claim for constructive dismissal under the Employment Rights Act 1996, the claimant must have been an employee (as opposed to a worker). (Workers (and employees) whose treatment by their employer amounts to unlawful discrimination because of a protected characteristic can seek redress by bringing a claim under the Equality Act 2010.)
If the contract under which an employee is working is illegal, the right to claim constructive dismissal is excluded.
In most cases, employees can bring a claim for constructive dismissal only if they had at least one year's continuous service with their employer at the time of the effective date of termination, which is the date on which their resignation took effect (see Qualifying conditions in the Unfair dismissal: rights on termination section of the XpertHR employment law manual for more details). The one-year qualifying period is due to increase to two years from 6 April 2012.
However, there is no qualifying period where the constructive dismissal is for one of the automatically unfair reasons for which there is no service requirement (see Fairness in the circumstances in the Unfair dismissal: rights on termination section of the XpertHR employment law manual). For example, if an employee makes a flexible working request and the employer reacts by assigning only limited or mundane tasks to the employee that are not covered by his or her contract of employment, the employee could resign and claim constructive dismissal, regardless of his or her length of service.
For an employee to be able to bring a claim of constructive dismissal, how soon after the employer's breach or repudiation, must he or she resign?
The immediacy with which an employee must accept his or her
employer's alleged breach of contract and resign depends on the circumstances,
particularly the nature of the alleged breach. For example, an employee who
claims that his or her working environment has been made intolerable due to
bullying or harassment will usually be expected to have reacted more quickly
than an employee whose claim is based on financial matters such as the
employer's failure to pay his or her salary on time. In Bashir v Brillo Manufacturing Co [1979] IRLR
295 EAT, a delay of 10 weeks was held to be explicable because the employee
was off sick for this period. In contrast, in Fereday v
In so-called "last straw" cases, an incident that would not constitute a fundamental breach of contract by itself can entitle the employee to resign and claim constructive dismissal if the incident was the last in a series of breaches of contract or a course of conduct that cumulatively amounts to a breach of the implied term of trust and confidence. In a "last straw" case, the employee can claim constructive dismissal following the most recent incident even if one of the earlier events in the course of conduct amounted to a fundamental breach of contract and the employee did not treat that breach as a fundamental breach by resigning at the time of that incident. The act constituting the "last straw" does not have to be of the same character as the earlier acts. However, it must contribute to the breach of the implied term of trust and confidence. An entirely innocuous act on the part of the employer cannot be a last straw triggering the employee's resignation.
In constructive dismissal cases, as the employer's conduct constitutes a repudiatory breach of contract, the employee is entitled to terminate his or her employment by resigning with immediate effect, without giving statutory or contractual notice. However, the employee can terminate his or her employment by resigning with notice if he or she chooses to do so.
Constructive dismissal claims to the employment tribunal must be brought within three months of the effective date of termination.
Must an employee raise a formal grievance before he or she can claim constructive dismissal?
Since the statutory grievance procedures were abolished on 6 April 2009, if an employee fails to submit a grievance prior to resigning and claiming constructive dismissal, this will not prevent him or her from being able to pursue the claim. However, it may affect the level of any compensation that the employment tribunal awards. This is because s.207A of the Trade Union and Labour Relations (Consolidation) Act 1992 gives employment tribunals the discretion to increase or reduce awards by up to 25% where the employer or employee unreasonably failed to comply with the Acas code of practice on disciplinary and grievance procedures (PDF format, 1.58MB) (on the Acas website). The Acas code says that employees should "let the employer know the nature of the grievance" and "if it is not possible to resolve a grievance informally employees should raise the matter formally and without unreasonable delay … in writing".
The next article in this series will be a checklist for avoiding constructive dismissal claims and will be published on 12 December.
Anna Chamberlain (anna.chamberlain@osborneclarke.com) is a senior solicitor at Osborne Clarke.
Further information on Osborne Clarke can be accessed at www.osborneclarke.com.
