Whilst many managers have heard the term constructive dismissal, what this is and how it can happen in practice isn’t something that businesses are always familiar with, but an awareness is important.
Businesses don’t usually deliberately set out to constructively dismiss an employee; more often, it happens inadvertently – the risk is overlooked and/or there are missteps in handling a situation.
Having an understanding of constructive unfair dismissal can help you to protect your business. So, what are some fast facts every business needs to know?
- What is constructive unfair dismissal?
- Is it a claim employees with short service can make?
- What sort of situations could give rise to the risk of a constructive dismissal claim?
- If an employee wins a constructive dismissal claim, how much could it cost my business?
- What should I do if an employee in my business complains about how they are being treated?
1. What is constructive dismissal?
Broadly, this is where the employer does not expressly terminate the employment contract but behaves in such a way as to entitle the employee to resign and claim that they have effectively been dismissed as a result of the employer’s conduct. A resignation in such circumstances may amount to a constructive unfair dismissal.
Taking a closer look:
- There must be an actual or anticipatory breach of contract by the employer which is a fundamental or repudiatory breach. That is one that goes to the root of the contract so as to be sufficiently serious to justify the employee’s resignation (for example the employer has, without reasonable and proper cause, conducted itself in a manner calculated or likely to destroy or seriously damage the relationship of trust and confidence)
- The employee must resign in response to the breach, rather than for some other reason
- The employee must not delay too long in resigning – otherwise, they may be regarded as having affirmed the contract, affecting their ability to make a successful constructive dismissal claim
Should the tribunal find that an employee has ‘ticked the initial boxes’ for a constructive dismissal, the employer still has the opportunity to argue that the ‘dismissal’ was fair – that there was a fair reason for it and they acted reasonably in dismissing for that reason. Whether an employer will be successful in doing so depends on the facts of the case.
2. Is it a claim employees with short service can make?
Not in most cases, currently, at least two years’ continuity of service is usually required. However, it is possible for a short-serving employee to bring a constructive unfair dismissal claim where it is related to an ‘automatically unfair’ reason for dismissal (e.g whistleblowing) or discrimination. As such, it’s always important to seek advice before taking action in relation to an employee, irrespective of their length of service.
3. What sort of situations could give rise to the risk of a constructive dismissal claim?
A wide variety of behaviour can give rise to the risk of a claim for constructive dismissal, for example:
- Unilaterally reducing an employee’s pay
- Unilaterally changing an employee’s duties in a way which is not permitted, e.g. leading to a loss of status or seniority
- Unilaterally changing an employee’s terms and conditions of employment, e.g. removing or reducing a contractual benefit such as company sick pay, changing working hours
- Imposing a disciplinary sanction short of dismissal, which is outside the range of reasonable penalties for that offence in the circumstances of the case
- Placing an employee on short-time working/layoff without an appropriate contractual clause or employee agreement
- An employee being subjected to workplace bullying/harassment
Bear in mind that a fundamental breach doesn’t have to be a one-off act; an employer may breach an employee’s contract of employment repeatedly in a more minor way, but the cumulative effect may amount to a fundamental breach. An employee may also try to claim constructive unfair dismissal following an act which they consider to be ‘the last straw’.
4. If an employee wins a constructive dismissal claim, how much could it cost my business?
If the employee is successful in their claim for constructive dismissal, they would be entitled to unfair dismissal compensation. This is made up of a basic award calculated the same way as statutory redundancy pay and a compensatory award. Unless the constructive dismissal is for one of a few automatically unfair reasons or discrimination, this would be capped. For further information regarding this, please get in touch.
5. What should I do if an employee in my business complains about how they are being treated?
Often, employees try to resolve the issue/s with their employer via the company grievance procedure before resigning. Not only because leaving their job is a big step (and many employees do want the situation ‘resolved’ so they feel they don’t ‘have’ to leave), but also because a failure to raise a grievance and follow the ACAS Code of Practice on Disciplinary and Grievance procedures could have a financial impact. It could result in up to a 25% reduction of the compensatory award if they are successful in a constructive dismissal claim.
If you receive a complaint from an employee about how they are being treated, it will be important to handle the matter promptly and effectively. Your first step should be to get in touch for advice on the specific facts of the situation your business is dealing with. Bear in mind, if an employee does go on to make a successful constructive dismissal claim and your business has unreasonably failed to follow the ACAS Code of Practice on Disciplinary and Grievance procedures, there could be an uplift on the compensatory award of up to 25%.
Need help with an HR matter in your business? Please don’t hesitate to contact us.