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What is a constructive unfair dismissal?

Posted on 4th July 2013
Briefing note

This Briefing Note summaries when you can bring a claim for constructive unfair dismissal following your resignation from your employment. It explains the key legal questions that an employment tribunal will consider and highlights some tactical considerations.

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Meet the author

Carly Murphy Carly
Murphy
Employment Law Solicitor Telephone: 01473 694401

An incomplete or badly worded resignation letter can result in you losing the right to claim you have been constructively and unfairly dismissed

Warning

The law relating to constructive dismissal is relatively complicated and there are many traps for the unwary. This is an area of employment law where you should take independent legal advice from an experienced employment law solicitor before resigning.

What is a constructive dismissal?

A constructive dismissal occurs when:

1.    your employer has committed (or you think they will commit) a ‘repudiatory breach’ of your contract of employment

2.    you then resign (with or without notice) from your employment in response to the breach; and

3.    you did not delay too long after the breach before resigning.

What amounts to a repudiatory breach of contract?

Not all breaches by your employer of your employment contract will entitle you to resign and claim that you have been constructively and unfairly dismissed. A breach must be ‘repudiatory’, meaning fundamental.

Therefore, if your employer is guilty of conduct that is significant going to the ‘root’ of your contract of employment, or shows that it no longer intends to be bound by an essential term of your contract, it has most likely acted in repudiatory breach of contract and you are entitled to resign and claim you have been constructively dismissed.

Legal issues

  • The breach could relate to an express term of your contract, be it one in writing or a term that was only agreed verbally. For example your employer imposes a unilateral decrease in your pay or significantly alters your duties without your consent.
  • The breach could be in relation to an implied term of your contract. A number of terms are normally implied into every contract of employment. The most common one is the implied term of mutual trust and confidence: neither the employee nor employer should act towards the other so as to seriously harm or destroy the working relationship with the other.
  • The breach may consist of a single incident or a number of incidents over a period of time, culminating in a final incident which may not be serious by itself but is treated by you as the ‘last straw’ causing you to resign.
  • It can be difficult to identify if there has been a repudiatory breach of contract. What happened is often disputed and can span a lengthy period of time. 
Further examples of actions by employers which may amount to a repudiatory breach of contract include:

  • removing your car allowance or company car without your agreement
  • demoting you without your agreement, or at least without good reason
  • acting in a discriminatory way towards you
  • not dealing with your grievance in a timely, fair and objective way; or
  • unfairly imposing on you a disciplinary or capability procedure or warning.
The above examples will not always be a repudiatory breach of contract. All the circumstances must be considered and each case will be decided on its own facts.

You must resign in response to your employer’s breach

Your employer’s actions in breach of your contract of employment will not automatically bring your employment to an end. You may decide that you accept what your employer has done and continue at work. Alternatively, if you are unhappy to carry on at work, you must ‘accept’ the breach of contract by your employer, resign and bring your employment to an end.

Whether you have resigned is generally a straightforward question of fact. You will probably have a letter or email giving your resignation or will be able to point to a conversation where you resigned. Your resignation could also be demonstrated by your actions, for example not attending work or starting employment elsewhere. This is not reliable though. Your resignation must be clear and unequivocal. Your employer must also be aware of it!

The tricky part can be showing that you resigned in response to your employer’s breach of contract and not for another reason.

You must not delay too long before you resign

If your employer has fundamentally breached your contract you have a choice: You can decide to continue with your employment or resign and bring it to an end.

You must, however, make your decision reasonably quickly but it is often a difficult one to make because there are a number of legal and practical factors to take into account. If you resign you will lose your job, your income and face bringing an employment tribunal claim. If you delay too long you may be judged to have accepted your employer’s actions and lose the right to argue you have been constructively and unfairly dismissed.

Watch how you act

You should be careful how you act towards your employer whilst you make up your mind. You can lose the right to claim you have been constructively dismissed if you ask your employer to do something consistent with your continued employment or by acting in a way that shows you are happy for your employment to continue notwithstanding your employer’s breach of your employment contract.

Whilst you decide you should inform your employer that you are unhappy with how it has acted towards you so. This should minimise the risk of your employer arguing that you accepted the breach of contract and waived your rights to resign and then claim you were constructively dismissed.

Should you raise a grievance?

A good way of preserving your rights is often to raise a formal grievance and provided it is done in the right way this can give you more time to decide what to do. It can also give your employer the time and opportunity to resolve your concerns and avoid you having to resign and start an employment tribunal claim.

More details about grievances and how we can help you formulate and present one can be found here.

Your letter of resignation

If you decide that you wish to resign in response to your employer’s conduct or behaviour towards you then the next most important step is the wording of your letter of resignation. It is essential that your letter sets out in full the reason(s) for your resignation. An incomplete or badly worded resignation letter can result in you losing the right to claim you have been constructively and unfairly dismissed. Employment tribunal cases are won and lost on the content of the letter of resignation.

Do you resign with or without notice?

You have a choice: to resign with immediate effect and not work out any notice, or you can resign on notice and then work out your notice period. Either option will mean you can bring a claim for constructive and unfair dismissal. However, you should take professional advice before deciding to resign on notice as this approach may harm the merits of your claim.

Get expert professional advice

Working out if you should resign and how to word your letter of resignation are key areas where getting expert professional advice is often essential. The timing of your resignation can also be an important decision which an employment law solicitor can help work out.

Remedy | Damages for wrongful dismissal

A wrongful dismissal is where your employer has expressly or constructively dismissed you in breach of your contract of employment.

If you resign without giving notice and are successful with your claim you can seek to recover damages for your ‘wrongful constructive’ dismissal. The value of this will be your net pay for the duration of your notice period that you did not work. For example, if your contract of employment entitled you to three months’ notice of dismissal the tribunal should award you three months’ net pay (less any net income earned from any new employment.)

Remedy | Compensation for unfair dismissal

A constructive dismissal is not necessarily an unfair dismissal but in the vast majority of cases it will be! To find out if you have a valid claim for unfair dismissal please see When will your dismissal be unfair?.

A claim for constructive unfair dismissal is a claim for unfair dismissal and very similar issues are considered.

If you want to bring a claim for constructive unfair dismissal you must be an employee who has the correct minimum qualifying period of employment, and you must have been dismissed. With a constructive dismissal this means you have to show that your resignation in law should be treated by the employment tribunal as a dismissal based on your employer’s misconduct, bad or unjustified behaviour towards you.

Assuming the employment tribunal decides that your resignation amounted to a constructive dismissal it must then go on and look at your employer's conduct and decide whether it acted fairly in the circumstances. If your employer’s behaviour fell outside the band of reasonable responses then your constructive dismissal should be held to be unfair.

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