What Is Constructive Dismissal in Employment Disputes?

Constructive dismissal occurs when an employee resigns because their employer has committed a serious breach of contract. Although the employee resigns voluntarily, the law may treat the resignation as a dismissal if the employer's conduct leaves no reasonable alternative but to leave.

It is governed primarily by the Employment Rights Act 1996 and developed through case law, including principles relating to breach of contract and the implied term of mutual trust and confidence.

Constructive dismissal claims are commonly brought in employment tribunals and often overlap with unfair dismissal claims, discrimination, or breach of contract disputes.

Legal Definition of Constructive Dismissal

Constructive dismissal arises where:

• The employer commits a fundamental breach of contract, and
• The employee resigns in response to that breach, and
• The employee does not delay too long before resigning (they do not “affirm” the contract)

A key legal principle is that employment contracts include an implied term of mutual trust and confidence. If an employer seriously undermines this trust, it may amount to a fundamental breach.

The leading authority is Western Excavating (ECC) Ltd v Sharp [1978], which confirmed that resignation must be in response to a fundamental breach, not simply dissatisfaction.

What Counts as a Fundamental Breach

A fundamental breach is a serious violation of the employment contract. It can be express (breaking a written term) or implied (breaching trust and confidence).

Common examples include:

1. Serious misconduct by the employer

• Bullying or harassment
• Discriminatory behaviour
• Victimisation or retaliation

2. Unilateral changes to contract terms

• Pay cuts without agreement
• Significant changes to working hours
• Demotion without justification

3. Failure to deal with grievances

• Ignoring complaints of bullying or harassment
• Failing to investigate serious workplace issues

4. Unsafe working conditions

• Requiring work in unsafe environments
• Ignoring health and safety obligations

5. Non-payment of wages

• Late or missing salary payments
• Unlawful deductions from pay

6. Breakdown of trust and confidence

• Undermining behaviour by management
• Exclusion from work without reason
• Public humiliation or unjustified criticism

The Employee's Resignation Requirement

To bring a constructive dismissal claim, the employee must resign in response to the breach.

Key points:

• The resignation must be linked to the employer's conduct
• The employee should not wait too long after the breach
• Continuing to work for a long period may be treated as acceptance of the breach (“affirmation”)

If the employee delays too long, a tribunal may find that they accepted the situation and lost the right to claim constructive dismissal.

Constructive Dismissal and Unfair Dismissal Claims

Constructive dismissal is treated as a form of dismissal under employment law.

This means the employee may bring a claim for:

• Unfair constructive dismissal (if eligible)
• Wrongful dismissal (breach of contract, usually notice pay)
• Related claims such as discrimination or unpaid wages

However, eligibility rules apply:

• Most unfair constructive dismissal claims require 2 years' continuous service
• Automatically unfair dismissal exceptions may apply with no minimum service requirement

Legal Test Used by Employment Tribunals

Employment tribunals assess constructive dismissal using a structured test:

Step 1: Was there a fundamental breach?

The tribunal considers whether the employer's conduct was serious enough to destroy trust and confidence.

Step 2: Did the employee resign because of it?

There must be a clear causal link between breach and resignation.

Step 3: Did the employee affirm the contract?

If the employee continued working without objection for too long, the claim may fail.

Examples of Constructive Dismissal Cases

Constructive dismissal claims often arise in situations such as:

• An employee being repeatedly bullied by a manager and HR failing to act
• A unilateral reduction in pay without agreement
• An employee being sidelined after returning from maternity leave
• Serious grievances being ignored over a long period
• Sudden demotion without performance process or justification

Each case depends heavily on evidence and timing.

How to Bring a Constructive Dismissal Claim

Step 1: Raise a grievance

Employees are generally expected to raise a formal grievance before resigning, although this is not strictly required in all cases.

Step 2: Resign in response to breach

The resignation should clearly relate to the employer's conduct.

Step 3: ACAS Early Conciliation

Before issuing a tribunal claim, the employee must contact ACAS and attempt early conciliation.

Step 4: Employment tribunal claim

If unresolved, a claim is submitted using an ET1 form to the employment tribunal.

Time Limits for Claims

Strict time limits apply:

• Claims must usually be submitted within 3 months less 1 day from the date of resignation (effective termination date)

Failure to comply with this deadline normally prevents the claim from proceeding unless exceptional circumstances apply.

Remedies for Constructive Dismissal

If a tribunal finds constructive dismissal, it may award:

Financial compensation

• Basic award (similar to redundancy calculation)
• Compensatory award for lost earnings and benefits

Other remedies

• Reinstatement (return to job)
• Re-engagement (alternative role within employer organisation)

Compensation is intended to reflect financial loss caused by the dismissal.

Common Defences by Employers

Employers often defend constructive dismissal claims by arguing:

• No fundamental breach occurred
• The employee resigned for unrelated reasons
• The employee accepted the situation by continuing to work
• Reasonable procedures were followed

Tribunals examine documents, communications, and witness evidence to determine the true position.

Constructive Dismissal vs Ordinary Resignation

A key distinction:

• Ordinary resignation: Employee leaves voluntarily with no legal claim
• Constructive dismissal: Resignation caused by employer's serious breach of contract

The difference depends on whether the employer's conduct left the employee with no reasonable choice but to resign.

Constructive Dismissal vs Wrongful Dismissal

• Constructive dismissal: Focuses on unfairness and breach leading to resignation
• Wrongful dismissal: Focuses on breach of contract (often notice pay or contractual terms)

Both claims may be brought together depending on circumstances.

Key Takeaways

Constructive dismissal occurs when an employee resigns due to a serious breach of contract by their employer. The breach must be fundamental, and the resignation must be a direct response to it. Common causes include bullying, pay disputes, unilateral contract changes, and failure to address grievances. Claims are brought to an employment tribunal, usually within three months less one day of resignation, and may result in financial compensation or reinstatement.