Small business owners need to stay up to date when it comes to employment law. One element of UK employment law that often comes up is constructive dismissal.
This guide aims to shed light on what constructive dismissal entails, what constitutes it and how it differs from unfair dismissal. We'll explore examples, timelines and how to avoid it, while also touching on redundancy as a potential trigger.
What is constructive dismissal?
Constructive dismissal is a complex legal concept. It occurs when an employee resigns due to conduct by the employer that is a repudiatory breach of contract. Simply put, it’s a situation where an employer’s actions force the employee to resign. This is often due to the employer creating an untenable working environment. Specific criteria must be met to constitute a claim for constructive dismissal.
What constitutes constructive dismissal?
The following elements must be present for a situation to be considered constructive dismissal:
1. Repudiatory breach of contract – the employer must have committed a repudiatory breach of the Employment Contract (this breach could be related to significant changes in working conditions, harassment or other forms of mistreatment). It can be a breach of an express term or an implied term, and may be as a result of one breach or as a “last straw” in a series of breaches.
2. Employee must accept the breach – the employee’s contract does not come to an end unless the employee accepts the breach, which must be ‘unequivocal’ and ‘unambiguous’.
3. Employee must resign in response to the breach - although case law has held that it does not have to be the only reason for the employee’s resignation.
Is constructive dismissal the same as unfair dismissal?
Constructive dismissal and unfair dismissal are distinct concepts in UK employment law. Unfair dismissal claims arise when an employee is dismissed by their employer without a fair reason. Constructive dismissal occurs when the employee resigns due to their employer's actions or breaches of the employment contract.
Unfair dismissal claims focus on the act of the employer’s dismissal, whereas constructive dismissal revolves around the employee's decision to resign because of unacceptable working conditions. These are separate legal avenues and it's crucial to understand the differences when addressing employment-related issues.
How long does a constructive dismissal case take?
The timeline for a constructive dismissal case can vary. The process may involve several steps, including raising a grievance, engaging in discussions with the employer and potentially pursuing an Employment Tribunal Claim. The time limit for bringing a claim for constructive dismissal is generally three months from the date of the resignation.
The length of the case may depend on factors such as the complexity of the situation, negotiations between parties and the caseload of the Employment Tribunal. On average, it may take several months to over a year for a case to reach a resolution. Therefore, both employers and employees need to approach these cases with patience and an understanding of the legal procedures involved.
What are examples of constructive dismissal?
- Significant reduction in pay – if an employer significantly reduces an employee's pay without their agreement, it can lead to a claim for constructive dismissal
- Harassment and bullying – a pattern of harassment, bullying, or discrimination by the employer or colleagues that creates a negative work environment can justify a constructive dismissal claim
- Breach of trust – if an employer breaches the employee's trust, for instance, by not addressing serious health and safety concerns, it can trigger a constructive dismissal case
- Unilateral changes – making significant changes to the employee's terms and conditions of employment without their consent, such as changing working hours or job responsibilities, can be grounds for a constructive dismissal claim
The Advisory, Conciliation, and Arbitration Service (ACAS) provides valuable guidance on constructive dismissal cases. Employers and employees can benefit from consulting the ACAS Code of Practice, which offers a framework for resolving employment disputes, including those related to constructive dismissal. Following these guidelines can help in the efficient resolution of disputes and, if possible, avoid the need for litigation.
Can an employee with less than two years of service claim constructive dismissal?
That depends. Employees with a successful constructive dismissal claim may be able to receive compensation for breach of contract and unfair dismissal. The employee must have two years’ service to claim compensation for the constructive unfair dismissal element, although there are statutory rules relating to notice which may extend their length of service.
When it comes to a successful breach of contract element, the employee will receive compensation which is designed to put them back into the financial position they would be in if they had received the correct notice. They might have had to work for one week to be entitled to notice (and therefore compensation) but this will depend on the terms of the contract.
Employers must be aware of this and ensure that they maintain a positive employment relationship with all employees, regardless of their length of service, to prevent constructive dismissal claims.
How to avoid constructive dismissal
As a small business owner, preventing constructive dismissal is not only legally essential but also a matter of supporting a positive work environment. Here are some key steps to avoid constructive dismissal:
- Open communication – maintain open lines of communication with your employees (encourage them to raise concerns and grievances through a formal grievance process)
- Fair treatment – treat all employees fairly and equally (ensure that working conditions are consistent for all team members)
- Address concerns promptly – when employees raise a grievance, address it promptly and transparently, following the ACAS code of practice
- Consult on changes – if you need to make changes to an employee's terms and conditions, consult with them and seek their agreement whenever possible
- Provide training – train your management team in employment law and best practices to prevent potential constructive dismissal situations
Can redundancy be constructive dismissal?
Redundancy is a legitimate reason for ending an employment relationship. However, it's important to follow the proper redundancy procedures to avoid potential constructive dismissal claims. If employees feel that their redundancy was not conducted fairly or in line with the law, they may still pursue a claim for constructive dismissal.
You need to ensure that any redundancy processes adhere to legal requirements and consider consulting with an employment law solicitor to navigate these situations effectively.
Get legal assistance from LawBite
If you find yourself facing a constructive dismissal claim, seek legal advice promptly to navigate the situation effectively and protect your business.
At LawBite, we're here to assist you in understanding and addressing employment law issues, ensuring your business positioned for success. If you’re dealing with a dismissal claim or you’re looking to implement processing to prevent your business from a claim, book a free 15 minute consultation with one of our expert employment lawyers or call us on 020 3808 8314.