Dealing with a constructive dismissal claim can be complex, time-consuming and a distraction from the day to day running of your business. Defending any legal proceedings could also damage your business’ reputation. By making sure you and your HR and /or managerial staff have a clear understanding of the concept of constructive dismissal, you get sound legal advice from employment solicitors, and know what policies and procedures to have in place to avoid this type of claim, are all vital steps to make sure you comply with employment law and follow best practice guidance.

What is considered constructive dismissal?

Constructive dismissal is when the employee is not expressly dismissed by the employer but is entitled to resign as a result of the employer’s conduct.

The statutory definition of constructive dismissal is detailed in the Employment Rights Act 1996 and states that it applies if:

“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.”

But how should this be interpreted?

In each case of a constructive dismissal claim, all the facts and circumstances of that specific case will need to be examined. There is no judicial consensus as to how to interpret the legislation – historically, this has made constructive dismissal claims and tribunals complex matters. It’s prudent to understand the types of situations where an employee could claim constructive dismissal and the consequences of a successful claim so that you are aware of your liabilities as an employer before moving forward.

This will start with the employee’s contract.

Could you have been in repudiatory breach of their employment contract?

According to contract law, if the conduct of an employer could be defined as a repudiatory breach of the employment contract, entitling the employee to resign, this could be grounds for a constructive dismissal claim. Any breach will need to be evidenced by the employee. Think carefully about making changes to an employee’s contract terms – if you’re found to be in significant breach of the employee’s contract or it is determined that by your conduct you evidence an intention to no longer be bound by one of the terms of the contract, this could entitle the employee to resign and claim. It’s also worth noting that this could be an anticipatory breach, one single act or multiple acts that amount to being significant enough to entitle the employee to resign and claim.

What exactly is required for a constructive dismissal to be successfully established?

The following three elements are required to establish constructive dismissal:

• A repudiatory breach of an express or implied term of the employment contract. This could also be an anticipatory breach. It can arise from one or a series of acts on the part of the employer, and it must be a significant breach that would warrant the employee resigning.
• The employee should accept the breach of contract and treat their employment contract as ended, and subsequently resign.
• The employee should not delay in acknowledging and accepting the breach of contract otherwise this could waive the termination of the contract.

What kind of conduct could lead to a constructive dismissal claim?

When it comes to assessing the kind of risk to your business as a result of this kind of claim, it can be very difficult. Interpreting the law is one hurdle to overcome but, using that knowledge to make sure you reduce the risk of constructive dismissal claims is vital to make sure you avoid damaging your reputation and the financial strain of having to settle a claim of this kind.

To give you a better idea of the kind of employer conduct that could lead to a constructive dismissal we’ve listed a few examples below:

• Discrimination against the employee
• Failure to pay the employee for work carried out
• Reducing the employee’s pay without their agreement
• Changing the employee’s role or duties when there is no provision for this in the employee’s contract
• Failure to address an employee’s grievance
• Where a disciplinary matter is unjustifiable, especially if the allegation is of a very serious matter
• Failure to give the employee the correct period of notice to terminate their contract
• Failure to abide by the term of mutual trust and confidence
• Bullying, harassment, oppressive behaviour
• Demotion or loss of status

For some the above may be crystal clear, but if you do not currently have HR personnel who are trained in this area of employment law, it’s important to get legal advice. This will help, firstly, when drafting employment contracts, and secondly when handling any grievance or disciplinary procedures so that you can make sure that you apply the law correctly to any circumstances that could put you at risk.

What you should know about express and implied contractual terms

Some employers may not be aware that both express and implied terms in an employee’s contract play a role when it comes to making claims of breach of contract or constructive dismissal.

So, what’s the difference between the two?

When terms are expressly detailed in an employee’s contract they are written down, plain for all to see, in the contract itself. This could be the employee’s salary amount for example. If then, the employee’s salary is decreased without prior agreement, this is a clear breach of contract and may form the grounds for a claim to be made.

An implied term, however, is not written down in the contract. Instead, it is an unstated term that binds the employer and employee, forming a fundamental part of that working relationship. This is most commonly represented by the implied term of mutual trust and confidence and can be used to form the basis of a constructive dismissal claim if it can be proven and if it goes to the root of the contract. Examples of an implied breach of trust and confidence could be that the employer failed to provide the employee with a impartial grievance process, the employer misled the employee intentionally, or where the employer failed to investigate a health and safety complaint made by the employee. If evidenced, all these examples could lead to a constructive dismissal claim being successfully made.

What about the last straw doctrine?

The last straw doctrine refers to the concept of an employee resigning as a result of a series of breaches of contract or breaches of the implied term or trust and confidence on the part of the employer, culminating in a final breach (or the last straw). The final breach could be minor but should still be significant enough to substantiate the incidents as a breach.

For an employee to rely on the last straw doctrine as the basis of a constructive dismissal claim, the conduct of the employer must show an intention not to remain bound by the employee’s contract. Any breaches that precede ‘the last straw’ breach, that may have been waived, can be revived by the last straw incident. For the employee’s claim to be successful, the last straw incident should add significance to the breach even if it is of a different nature to the prior incidents.

The process of raising grievances before the employee resigns

Previously, under the statutory dispute resolution procedure, an employee would not be able to bring a constructive dismissal claim without first raising a grievance. This has not been the case since 2009, however, it is still in the employee’s favour to raise a grievance before attempting to bring a constructive dismissal claim to tribunal. This is because failure to raise a grievance could mean that the employee’s compensation is less than it would have been, had they raised a grievance and exhausted the company’s internal procedures in the first instance.

It’s important to remember that the tribunal can increase or decrease compensation depending on how well the employee or the employer complies with ACAS. By making sure you comply with the ACAS Code of Practice on Disciplinary and Grievance Procedures (ACAS Code) and all other guidance supplies by ACAS and your legal advisor you will reduce the risk of costly claims.

Is there anything you can do to prevent constructive dismissal claims?

Being well informed and creating sounds policies and procedures will go some way to helping you avoid any constructive dismissal claims being brought against you by an employee. Here we’ve detailed steps that you can take, as an employer, to avoid a costly tribunal.

Make sure your company policies are up to date and accessible to all employees

All your staff should be clear on your company policies so making sure they’re easily accessible is important. This will also avoid any confusion as to what is expected of employees, and what they may be entitled to, helping you set clear expectations right from the off.

It’s of equal importance to make sure that all HR personnel and managers are aware of their responsibility to correctly carry out any grievance or disciplinary procedures and that they receive regular training to make sure all HR procedures continue to be carried out correctly. It’s sensible to seek legal advice from employment solicitors when updating your company policies and procedures.

Do your research on contracts and employment law

Educating yourself and key HR staff on employment contract terms and the Equality Act, and how this could impact you and your employees, will ensure that you and your management team are much more aware of what is reasonable conduct towards employees, helping you to avoid serious grievances or claims of constructive dismissal.

Conduct performance management regularly

By conducting regular appraisals with employees and sensitively and clearly communicating any dips in their performance can be handled swiftly and in the best interests of the company and the employee. If, for any reason, the employee’s performance does not improve, you have already started to have these kinds of conversations with them so they will be less shocked should a more formal performance management process have to be carried out. This kind of open and regular communication should be part and parcel of your HR processes so that clear expectations are set and met, avoiding any need for any grievance or disciplinary procedures developing into a claim for constructive dismissal.

Through all of this legal jargon, it’s important to remember that, as an employer, as long as you are acting reasonably and fairly towards the employee and any actions you carry out are justified, there will be no reason for an employee to make a claim against you. And if an employee does make a constructive dismissal claim against you, having the above measures in place should go a long way in ensuring you take all the steps necessary to protect your business, avoiding the risk of costly claims.