Resigned to your fate: what is constructive dismissal?

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Posted in:HR and Employment|October 14, 2013 | Join the mailing list

The term "constructive dismissal" is often misunderstood by both employees and employers.  This can cause difficulties when trying to bring a constructive dismissal claim, or when faced with such claims.  Here, we briefly set out the relevant
law, but as Nigel Crebbin has said: "It is one thing to understand the concept, but another to know whether you might be in a situation which amounts to constructive dismissal.  The legal tests are very fact-sensitive and ultimately only a Tribunal can decide. 
If you are considering resigning, or worried about a certain employee in your business, you should take legal advice as early as possible."

The Employment Rights Act 1996 states that a dismissal can occur where "the employee terminates the contract under which he is employed (with or without notice) in circumstances in which he is entitled to terminate it without notice by reason
of the employer’s conduct" (section 95(1)(c)).  This is known as "constructive dismissal". 

That begs the question: when is an employee entitled to terminate their contract of employment without notice?  The answer is, if the employer has committed a repudiatory breach of that contract.  This happens "if the employer is guilty of
conduct which is a significant breach going to the root of the contract of employment, or which shows that the employer no longer intends to be bound by one or more of the essential terms of the contract" but it is usually far from clear cut.

There can be a breach of an express or an implied term, but it must "go to the root of the contract".  Some simple examples are an employer’s failure to pay an employee, or a unilateral demotion (if this is not permitted by the contract). 

A more complicated (but far more likely) scenario is a breach of the implied term of trust and confidence.  Any breach of this term (which is implied into every contract of employment) will be a repudiatory breach.  However, there is no definitive
answer to the question of what conduct by an employer will constitute a breach.  It always depends on the facts and circumstances of the individual case (see further below).

To bring a claim for constructive dismissal, an employee must elect to treat the contract as at an end, by resigning in response to the repudiatory breach.  If the employee continues to treat the contract as binding on both parties ("affirmation"),
they will waive the breach.  This will mean they cannot use it in future as a reason to resign and claim constructive dismissal (except for "last straw" claims – see further below).  Allowance can be made for an employee to take some time to make their decision
to resign, but if they delay too long and continue to work, they may waive the breach (sometimes unknowingly).

If an employer informs an employee that it is going to do something, and if that action would be a repudiatory breach, the employee may be able to resign in response to that "anticipatory breach".  However, when the breach has not yet happened,
an employer can "cure" it.  Once cured, there is no breach of contract for the employee to rely on if they resign.  On the other hand, once it has been committed, a repudiatory breach cannot be undone by an employer.  The contract of employment might be affirmed
by the employee, but the breach cannot be "cured".

Of course, employment relationships are not always that simple, and "trust and confidence" is hard to define.  The "last straw doctrine" recognises that a course of conduct by the employer can culminate in one event (the "last straw"), to
which the employee responds by resigning.  The last straw does not need to be a significant breach of contract in itself, but if the breaches of contract during the employer’s course of conduct cumulatively amount to a repudiatory breach, there will be a constructive
dismissal.  The last straw argument allows an employee to "revive" the previous breaches of contract that might otherwise have been waived. 

The last straw event does not have to be "of the same character" as the earlier acts and it does not have to be "unreasonable" or "blameworthy" conduct, in isolation.  However, it cannot be utterly trivial, or entirely innocuous, even if
the employee genuinely, but mistakenly, interprets the act as hurtful and destructive of their trust and confidence in the employer. 

The law of constructive dismissal is developing all the time, as illustrated by two very recent decisions of the Employment Appeal Tribunal.  In Blackburn v Aldi Stores Limited, the EAT held that an employer’s failure to adhere to a fair
grievance appeal process was a breach of the implied term of mutual trust and confidence (and therefore could be the basis for a constructive dismissal claim).  You can see our September case law update

for further details.  Then, in a case reported this month (Wright v North Ayrshire Council), the EAT held that the employer’s repudiatory breach need only be an effective reason for an employee’s resignation, not the effective reason.  In that case,
there was a repudiatory breach by the employer, but the employee also had increased caring responsibilities, which made it difficult for her to continue working.  The employer argued that the caring responsibilities were the employee’s effective reason for
resignation.  The EAT said that the repudiatory breach was "an effective reason" for her resignation, and therefore she was constructively dismissed.  However, her compensation would be calculated in accordance with "the extent to which the breach was the
effective reason" for her resignation.

Some final points to note: (i) if the employee is claiming unfair dismissal (which is usually the case) the Tribunal, when assessing if the constructive dismissal is unfair dismissal, will also have to decide whether the employer acted fairly
in all the circumstances in accordance with equity and the substantial merits of the case; (ii) if an employee has not brought a grievance before resigning, any compensation awarded may be reduced; and (iii) finally, special rules apply to resignations in
the context of TUPE transfers, which is a separate topic, not discussed in this article.

For more information about any of the above or for practical commercial advice on this or any other aspect of employment law, please contact
Nigel Crebbin of the Berg Employment Team on 0161 833 9211 or email him at

Follow us on Twitter: @Berg_HR

The information and opinions contained in this article are not intended to be comprehensive, nor to provide legal advice. No responsibility for its accuracy or correctness is assumed by Berg or any of its partners or employees. Professional
legal advice should be obtained before taking, or refraining from taking, any action as a result of this article.

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