An Employer’s Guide to Constructive Dismissal
When we think about dismissal, we tend to view it as someone being ‘sacked’, that is, the employer has actively terminated the contract of employment.
There are 5 fair reasons for dismissal, namely:
- Capability (including medical capability)
- Statutory restriction/statutory ban
- Some other substantial reason (SOSR)
A constructive dismissal is where the actions of the employer entitle, or cause, someone to resign.
What are examples of constructive dismissal?
There’s no definitive list but the following are some of the most common examples of situations which may lead to a constructive dismissal claim:
- Contractual breaches:
- Repeatedly not being paid the correct amount and on time.
- Unilaterally varying the terms of the contract without justifiable reason and without consultation. For example, cutting hours, changing shift patterns, or imposing an unreasonable change in work location.
- Failing to allow someone to take annual leave or sufficient rest from work.
- Failing to address a complaint/s.
When a member of staff raises concerns about work related matters and the employer does not take appropriate action to investigate their concerns or take necessary action to remedy a genuine complaint, this may prompt someone to resign from their employment.
- Acts of discrimination. For example:
- Subjecting someone to less favourable treatment due to a protected characteristic, such as failing to extend contractual benefits to part-time workers or excluding those on maternity or adoption leave from bonus payments.
- Harassment and bullying due to someone’s ethnicity, sexual orientation, age, religion and so on. Please see our previous article on discrimination (here).
Will asking someone to resign automatically entitle them to claim constructive dismissal?
Not necessarily but it is very bad practice to ask someone to resign from their role and in the event of a constructive dismissal claim, it will certainly place you on the back-foot.
If someone says they wish to resign, there is no harm in asking that they confirm their intentions in writing but asking someone to resign is generally a ‘no no’.
Please see our guide to handling resignations here.
If I am concerned that an employee has resigned and has concerns regarding how they have been treated, what should I do?
It is good practice to have an exit interview with any employees who resign from their employment.
Not only is this good practice and a good way of managing employee retention, but it also gives the employee the opportunity to bring any concerns- whether they be minor gripes or serious concerns, to your attention.
If an employee does make you aware of any concerns, you should remind them of their right to raise an informal or formal grievance. Your grievance procedure should be outlined in your employee handbook.
It may seem like ‘poking the beast’ but it is far better to be forewarned and take action ahead of time as opposed to having to defend a claim.
Exit interview forms are available from Avensure.
Can the grievance procedure prevent a claim for constructive dismissal?
Yes, because the aim of the grievance procedure is dispute resolution.
It doesn’t mean that you are automatically safeguarded from a claim by referring an employee to the grievance procedure because it is how that grievance is handled which will make the difference.
By following the grievance procedure, i.e., investigating and responding to the grievance appropriately, this shows you are committed to trying to resolve the dispute, even though there is no guarantee that the employee will be satisfied with the outcome of that grievance.
Please see our previous article on handling employee disputes and grievances here.
Can an employee claim constructive dismissal for an incident that occurred years prior to them resigning?
There are some key essentials for a successful constructive dismissal claim:
- There needs to be an act committed (or one which is anticipated) which strikes at the heart of the contract between the employer and the employee. This act breaches the trust and the confidence, in a similar way that an employee severs the trust and confidence when they commit an act of gross misconduct.
- The employee must resign.
- The employee should not wait too long before ending their employment once that breach has occurred.
Again, this is not dissimilar to cases of gross misconduct against the employee. If an employer waits too long after the employee is alleged to have committed an act of gross misconduct, then tries to summary dismiss them, it may be considered that the employer did not consider the act of misconduct to be that serious.
In cases of constructive dismissal, if an employee tries to claim that their employer has fundamentally breached the contract, yet resigns years later, their position is weakened.
Are there time limits to constructive dismissal claims?
A claim for constructive dismissal would need to be submitted in three-months of the resignation.
An employee also requires 2 years’ service to make such a claim.
Your first sign that an employee intends to bring a claim is being contacted by ACAS. Employees must contact ACAS if they intend to bring a claim and ACAS will contact you under what is known as early conciliation.
You must ensure that you contact Avensure as soon as you are contacted by ACAS. For more information on early conciliation please see our guide here.
Should I report any contentious resignations to Avensure?
If we have taken out insurance on your behalf, then it is condition of that indemnity insurance that you keep us updated on any case developments.
If there is an ongoing case and the employee resigns, please don’t take that as ‘game over’- there may be a potential constructive dismissal claim lying in wait.
If you receive a resignation out of the blue and the resignation letter or email cites complaints or ‘grumbles’ then please notify us before you formally accept the resignation. Likewise, if the resignation does not contain any concerns but the employee has raised some concerns verbally prior to tendering their resignation- let us know.
We can only act on what we know about- the earlier you come to us, the better chance we have of working with you to try and nip any potential claims in the bud.
Next week– Medical capability and absence- your questions answered.