Constructive dismissal is a resignation which is deemed a dismissal. In other words, an employee’s position becomes so untenable because of the serious conduct of the employer that the contract between them necessarily comes to an end.
Section 95(1)(c) of the Employment Rights Act 1996 Section describes the circumstances in which a resignation will amount to a dismissal:
…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.
The right to resign may exist but in practice constructive dismissal cases are notoriously difficult to win at tribunal.
The legal test is Malik & anor v Bank of Credit and Commerce International SA  UKHL 23
…did the Respondent fundamentally breach the Claimant’s contract of employment by acting in a manner which was calculated or likely to destroy the relationship of trust and confidence with the Claimant.
‘without reasonable and proper cause’
It is worth noting the word ‘calculated’ here: there needs to be an element of intention on the part of the employer. Additionally, more recent case law has required actions to be “without reasonable and proper cause” meaning that employers are offered the defence of justification when faced with breach of contract dismissals.
The chief problem with constructive dismissal claims is attempting to distinguish poor conduct on behalf of the employer with conduct that is so serious that it destroys the relationship of trust and confidence with the Claimant.
A great many disgruntled employees will leave their jobs every year because they are dissatisfied with the treatment that they have received at the hands of their employer but they will not have been subjected to treatment serious enough to bring their contract to an end.
What sort of conduct entitles the employee to resign and claim unfair dismissal?
- The employer’s action are a significant breach of contract;
- The resignation is obviously related to the employers conduct;
- Employee responds quickly (delay in resigning may constitute acceptance of the treatment/changes on contract).
Constructive dismissal cases are very fact specific – tribunals will look at each case on its merits and make a decision about whether the employer’s conduct passes the breach of contract threshold. As such. It is difficult to provide general guidance about what might be sufficient to meet the test.
Examples of successful constructive dismissal cases
- Excessive use of contractual disciplinary powers: Cawley v South Wales Electricity Board  An employee was demoted by several grades and, despite contractual disciplinary procedures having been followed, the tribunal ruled that the extent of the demotion was an excessive use of contractual power and as such the contract had been breached.
- Significant change in ability to earn commission: Brown v Merchant  If an employment contract defines geographical area, commission etc. any change by the employer which has an impact on earnings may constitute a breach.
- Unilateral changes to pay, job content or status.
The level of the changes must be sufficiently high that the impact makes it impossible for an employee to continue to work for the employer. A 10% reduction in pay would be unlikely to cut it.
- Serious humiliation of employee in front of colleagues
- Improper use of disciplinary sanction such as levelling obviously false allegations or issuing a final warning for a minor offence. For example issuing a FWW for an employee who is a few minutes late on one occasion. (Stanley Cole(Wainfleet) Ltd v Sheridan )
- Working environment – A cramped office is the lot of many employees and unlikely to breach the implied term of mutual trust and confidence but where the situation has descended to the point at which the employee is unable to perform his/her duties then resignation may be the only solution.