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Constructive Dismissal

What is Constructive Dismissal?

Constructive dismissal arises when an employee resigns from employment as a result of either (1) a fundamental breach of the employment contract by the employer, or (2) a series of incidents which when taken together amount to a fundamental breach of contract.

The employer’s breach can take the form of a breach of an express term of the employee’s contract, or an implied duty (for example) to ensure the employee receives reasonable and proper treatment during employment (the duty of mutual trust and confidence).

What are grounds for constructive dismissal?

Each situation must be looked at on its own facts, but common examples are:

  • a failure to pay wages or bonus when due
  • taking unfair disciplinary action
  • demotion or blocking promotion without good reason
  • changing important terms and conditions of work without agreement
  • failing to prevent repeated harassment or bullying at work
  • discriminatory behaviour

How should an employee respond to a serious breach of contract?

An employee can resign immediately explaining the reasons if they are sufficiently serious, or (more usually) raise the problem with the employer if it is capable of being resolved. This should be by way of a formal written grievance using the grievance procedure. If there is an unreasonable delay in taking action or resigning then an employer can argue that the employee has accepted the breach, or that it was not sufficiently serious to justify resignation. An employee can therefore write reserving the right to resign depending on what action the employer takes. A failure to use the grievance procedure where appropriate could be deemed a breach of the ACAS Code of Practice and any later compensation reduced by up to 25%.

How should an employer respond?

An employer should follow the grievance procedure if it is invoked, or at least investigate, hold a meeting and decide on a fair outcome in discussion with the employee. A failure to deal with a grievance properly could be deemed a breach of the ACAS Code and any later compensation increased by up to 25%.

What if the employee has already resigned?

An employee can still hold a meeting with the employee and offer to take corrective action and reinstate the employee, if this would be a reasonable outcome. If the employee unreasonably refuses then this could affect the right to recover compensation, or reduce any later compensation.

What legal action can an employee take?

An employee can commence Employment Tribunal proceedings claiming damages for any loss of notice or (if the employee has 2 years continuous service) compensation for unfair dismissal (see our Guidance Notes on Unfair Dismissal). The employee must follow the ACAS conciliation procedure and any claim must be issued within 3 months thereafter.

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