Constructive dismissal

Typically, the first way to claim constructive dismissal involves an employer making substantial changes to the employment contract, such as:

1. a demotion;
2. altering the employee's reporting structure, job description or working conditions;
3. lowering an employee's compensation;
4. changing hours of work;
5. imposing a suspension or leave of absence; and
6. relocating the employee's workplace.

In addition, failure on the part of an employer to provide employment standards (e.g. overtime pay, vacation pay, etc.), can result in a constructive dismissal.

Nevertheless, for an employee to have a successful case for constructive dismissal, the employer's breach must be fundamental. What is "fundamental" depends on the circumstances, and not all changes to the employment relationship give rise to a constructive dismissal. For example, administrative, i.e. non-disciplinary, suspensions might not amount to a constructive dismissal if imposed in good faith and justified by legitimate business reasons (i.e. lack of work). As well, a small reduction in salary, in tough times, and administered rationally, might not be a constructive dismissal.

An employee may also be able to claim a constructive dismissal based on an employer's conduct, rather than a change to a specific or implied term of the employment contract. Here, the second way to claim constructive dismissal examines whether the employer's (or employee of the employer) course of conduct, or even a single incident, demonstrates an intention to no longer be bound by the written or implied employment contract. An example of this kind of constructive dismissal is a "toxic work environment". In this regard, if a work environment is so poisoned that a reasonable person wouldn't be expected to return, then constructive dismissal is likely.

A toxic work environment is classically defined as unjustified criticism as well as vague and unfounded accusations of poor performance, especially where authority and respect with co-workers had been seriously undermined and compromised. Another example of toxic work environment is where the employer fails to prevent workplace harassment.

Although they tend to blend into one in a tribunal, strictly there are two types of constructive dismissal: statutory and common law.

At common law[8] the requirement is acceptance of a repudiatory breach, which means the employer has indicated it no longer considers itself bound by an essential term of the contract, e.g. the requirement to pay wages or the requirement not to destroy the mutual bond of trust and confidence. It does not matter if the employer did not mean to repudiate the contract.[9]

Under statute[5] the requirement is employer's "conduct" allowing the employee to "terminate with or without[5] notice"; as this can only happen with a repudiatory breach it amounts to the same thing.

A common mistake is to assume that constructive dismissal is exactly the same as unfair treatment of an employee – it can sometimes be that treatment that can be considered generally evenhanded nevertheless makes life so difficult that the employee is in essence forced to resign[10] (e.g., a fair constructive dismissal might be a unilateral change of contract justified by a bigger benefit to the business than the inconvenience to the employee), but the Employment Appeal Tribunal doubts that it will be very often that the employer can breach ERA96 s98(4) whilst being fair.

A constructive dismissal occurs when the employer's repudiatory breach causes[11] the employee to accept that the contract has been terminated, by resigning. The fairness of it would have to be looked at separately under a statutory claim for unfair dismissal.

The problems for the employer are that constructive dismissal is a contractual claim, which can be made in a tribunal for up to £25,000 or in court without limit, and, by dismissing constructively, it by definition misses out on the correct procedure meaning that even if the reason was fair, the decision was probably not, and so an unfair dismissal usually arises, creating a statutory claim alongside the contractual claim.

The court can look behind the lack of, or different, stated reason given by the employee at the time of resignation to establish that a cover story was in fact a resignation caused by fundamental breach.[12]

The person causing the dismissal does not need the authority to dismiss, as long as they acted in the course of employment.[5][13]

Constructive dismissal is typically caused by:-

• unilateral contract changes by the employer such as:
  • deliberate[14] cuts in pay or status (even temporary[15]),
  • persistent delayed wages,
  • refusal of holiday,[16]
  • withdrawal of car,[17]
  • suspension without pay (or even on full pay[18]),
  • dramatic changes to duties, hours[19] or location (beyond reasonable daily travelling distance[20]), or
• breach of contract in the form of bullying, e.g.:
  • ignoring complaints,[21]
  • persistent unwanted amorous advances,[22]
  • bullying and swearing,[23]
  • verbal abuse (typically referring to gender,[24] size[25] or incompetence[26]),
  • singling out for no pay rise,[27]
  • criticising in front of subordinates,[13]
  • lack of support (e.g. forcing to do two peoples' jobs),[28]
  • failure to notify a woman on maternity leave of a vacancy which she would have applied for if she had been made aware of it,[29]
  • refusal to confirm continuity on TUPE transfer,[30]
  • revealing secret complaints in a reference (even ones required by a regulator[31]), or
• breaches such as:
  • behaviour which is arbitrary, capricious, inequitable, intolerable or outside good industrial practice,[32]
  • conduct that undermined trust and confidence (i.e. offering an incentive to resign to avoid performance managing capability),[33]
  • refusal to look for an alternative role due to workplace stress,[34]
  • disproportionate disciplinary penalty,[35]
  • employer tricks employee into resigning.[36]

A flexibility clause does not allow the employer to change a type of job[37] as it is implied that the flexibility is to operate within the original job.

A mobility clause is subject to the implied term of mutual trust which prevents the employer from sending an employee to the other side of the country without adequate notice or from doing anything which makes it impossible for the employee to keep his side of the bargain.[38]

There is no right to automatic pay rises.[39] Nor is a smoking ban a breach.[40]

The employee's conduct is irrelevant to liability, although it can affect quantum; in other words it cannot get the employer off the hook, but could reduce compensation if he helped bring about his own downfall.

The conduct by the employer could be:

• a one-off repudiatory or fundamental breach of contract,
• a series of acts or omissions which amount to a repudiatory or fundamental breach of contract, or
• a 'last straw' act or omission which, although in itself not a repudiatory or fundamental breach of contract can when taken in the context of earlier breaches amount to conduct which is a repudiatory or fundamental breach of contract.

Note: unreasonable conduct will not suffice to establish constructive dismissal claim since a repudiatory or fundamental breach of contract must be established.

The employee has to resign within a reasonable time of the trigger, which is the one-off outrage or the last straw. The employee could work under protest while he or she finds a new job.[41]

If the employer alleges that the employee waived a breach by not resigning, each breach needs to be looked at to see if it was waived separately,[42] but even if a breach was waived, the last straw revives it for the purpose of determining whether overall there was a repudiation.[9]

If the employer alleges that the employee has affirmed a breach by not resigning, the employee could point out that no consideration was paid for it and so no contract change has been accepted. Acceptance of a replacement job would prove affirmation.[43]

An employee who stays on for a year after refusing to sign a new contract does not necessarily accept it.[44]

The last straw does not have to be similar to the earlier string of events or even unreasonable or blameworthy – it need only be related to the obligation of trust and confidence and enough that when added to the earlier events the totality is a repudiation.[45]

Although the employer's breach must be serious enough to entitle the employee to resign without notice, the employee is entitled to give notice if they prefer, so that they could enjoy the benefit of wages during the notice period.

To prevent the employer alleging that the resignation was caused by a job offer, the employee should resign first and then seek a new job during the notice period.

During the notice period, the employer could make the employee redundant[46] or summarily dismiss them, if it has the grounds to do so fairly. Otherwise, the reason for termination will be resignation and not dismissal, since the employee cannot serve a counternotice.[47]