11th April 2014

Constructive Dismissal in 4 Pictures

Constructive dismissal occurs when an employee terminates the contract under which he is employed in circumstances in which he is entitled to terminate it by reason of the employer’s conduct. Morecommonly, claims of constructive dismissal arise when an employee decides that “enough is enough”, and resigns from his or her employment on the basis of the employer’s unreasonable behaviour.

Determining whether constructive dismissal has taken place is complicated and, if the case proceeds to an employment tribunal, the legal burden is on the employee to demonstrate that he or she was entitled to resign from employment on the basis of the employer’s behaviour. Assistance in this area is given by the decision of the Court of Appeal in Western Excavating (ECC) Ltd v Sharp 1978 ICR 221. In this case, the Court of Appeal held that constructive dismissal was deemed to exist where the employer was guilty of conduct which was a significant breach going to the root of the contract of employment or which showed that the employer no longer intended to be bound by one or more of the essential terms of the contract. The Court of Appeal’s definition of constructive dismissal in this case is thorough and detailed but the test can be distilled into a four-part test which is illustrated below in picture form:

John Foxx/Stockbyte/GettyImages
John Foxx/Stockbyte/GettyImages
  1. There must be a breach of the contract of employment on the part of the employer. This can be a breach of an express term within the contract or an implied (or unwritten) term.  Frequently employees will rely upon a breach of the implied, unwritten duty of mutual trust and confidence between employee and employer.
Andy Andrews/Photographers Choice
Andy Andrews/Photographers Choice
  1. The breach must be fundamental. The breach must go to the root of the contract.  Basically the breach must be so serious that it allows the employee to treat the contract as having been terminated.  This part of the test is the one that employees frequently find difficult to satisfy.  A minor or insignificant breach on its own will not satisfy this part of the test.

causation-v-correlation-cartoon

  1. The employer’s breach must be the reason for the employee’s resignation. The employment tribunal would require to ask itself, “Would the employee have resigned if there had been no breach?”  If the answer to this is no, this part of the test will not be satisfied.
Tom Merton / OJO Images/Getty Images
Tom Merton / OJO Images/Getty Images
  1. The employee did not delay too long before resigning. If the employee waits too long after the breach before resigning, he or she may be deemed to have accepted the breach.

From an employee’s perspective, if the employee cannot satisfy all four parts of the above test, a claim of constructive dismissal will fail.

From an employer’s perspective, if you want to avoid a claim of constructive dismissal, you should treat your work force in a fair and transparent manner.  An employer should strike a balance between, on the one hand, keeping the workforce informed and happy and, on the other, supporting the managers.  Whilst employees may be unhappy about certain policy decisions in the workplace, it would not be appropriate for managers to feel undermined by the employer in their decision-making.  Similarly employers should ensure that they have a robust grievance policy in place and should not be afraid of using it as a tool for managing the workforce when necessary. Ultimately communication is key. Where appropriate, employers should ensure that employees have a forum to discuss matters if unhappy and also make sure that they deal with any grievances promptly and properly.

Cheryl Hogg
Trainee Solicitor – Employment Law

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