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Examples of constructive dismissal and how to avoid it

Employers should familiarise themselves with examples of constructive dismissal, so that they know how to avoid being accused of it in a court case. If an employment tribunal finds that your employee had no choice but to resign, they will be entitled to financial compensation from you. The basic award can be up to £16,320, while the additional compensatory award can amount to as much as 52 weeks of pay or £89,493 as of April 2021. Constructive dismissal is known in a legal context as constructive unfair dismissal.

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What are constructive dismissal cases?

Constructive dismissal involves making changes to your employees’ working conditions that encourage them to resign. Constructive dismissal is different to unfair dismissal, in that constructive dismissal involves an employee resigning, whereas employees can make unfair dismissal claims if you have fired them. Both involve a breach of your employee’s employment contract. This article will guide you through examples of constructive dismissal and how to avoid it. Your employee will have to be able to prove that they were forced to resign through constructive dismissal.

Constructive dismissal cases include:

  • allowing a climate of bullying or harassment;
  • false allegations against the employee;
  • changing their working hours so drastically that they are unreasonable;
  • allowing an unsafe work environment and ignoring complaints about it;
  • demotion of your employee with no reasonable explanation;
  • not paying your employee;
  • overly cutting your employee’s pay;
  • changes in your employee’s working location.

Let’s look more in detail at how some of the above points can contribute towards a case for constructive dismissal, so that you can avoid them or manage the situation appropriately.

Allowing a climate of bullying or harassment

Harassment related to a protected characteristic is specified in the Equality Act 2010. Bullying, however, is not mentioned in the Act. Therefore, it is important understand the definition of harassment – the Oxford English Dictionary defines it as ‘the act of annoying or worrying somebody by putting pressure on them or saying or doing unpleasant things to them’. As you can see from the definition, what counts as harassment is broad. If you spot cases of harassment from one employee to another in your workplace, you should deal with it immediately.

All instances of harassment require action to be taken against them, regardless of the harasser’s position or importance in your organisation. Failure to deal with harassment effectively in your workplace will mean that you may be held liable for the harassment that an employee has suffered.

False allegations against the employee

If you make false allegations against your employee, this counts towards constructive dismissal. For example, if your employee decides to resign because you claim that they stole cash from your shop’s till, but this is false, they could take this case to an employment tribunal on grounds of constructive dismissal.
This is because under Article 6 of the
Human Rights Act 1998, you have the right to be considered innocent until proven guilty. It also protects your employee’s right to a fair trial, so even if you think that the allegations are true, they are still permitted to take the case to court.

Drastic changes to an employee’s contract

When you give an employee the terms and conditions of your contract, you must accept these as their employer as well. This means that you cannot drastically change the number of hours that an employee works to the hours set out in an amended contract without good grounds.

You cannot force an employee to work longer hours without good reason and you cannot force an employee to accept such changes without prior notice and their consent. If your employee does not consent to longer hours, then they will have to inform you in writing.

This means that they will continue working for you under these new conditions, but ‘under protest’. If you and your employee cannot reach a satisfactory agreement about their hours while they are under protest, and your employee resigns as a result, this can count towards a constructive dismissal claim. Familiarise yourself with UK law around the reduction of your employee’s pay, too. It is illegal to unilaterally cut an employee’s pay. The legislation on this is complex, so it is advisable to seek legal advice if you are thinking to do so. If 20 or more employees are affected by an imposed pay cut, they are allowed to consult their trade union or representatives under the Trade Union and Labour Relations (Consolidation) Act 1992. If you are making a pay cut for what you believe is a valid reason, such as when an employee is underperforming or not meeting certain standards, you must consult them first. If this employee has been working for you for more than two years, they have the right to not be unfairly dismissed and can also claim for constructive dismissal.

Employees can also claim that you have made an unlawful deduction of wages according to the Employment Rights Act 1996. This includes late payments.

Their working environment is not safe or is no longer safe

Under UK health and safety law, all workers are entitled to a safe working environment. It is your responsibility as their employee to make sure that all your staff are working in a safe environment. This is regardless of whether they are a worker or contracted full-time employee. Therefore, if an employee’s working environment becomes so unsafe that they deem it necessary to resign, they could claim constructive dismissal.

The stages of an employee’s constructive dismissal

It is helpful to be familiar with the stages that need to take place for an employee to make a claim for constructive dismissal.

They are the following:

  • an employer commits a breach of their employee’s contract;
  • following the breach, the employee resigns. It is usually the case that employees resign without notice if they believe that there has been a breach so serious that they cannot continue working for the organisation;
  • the employee does not delay their resignation. If they do, you can argue against the validity of their claim during a court case.

How can your employee prove that constructive dismissal occurred?

Most constructive dismissal cases involve a drastic change to an employee’s contract and the terms and conditions of their employment with you. Employees are more likely to win a case at a tribunal if they can prove that there has been a breach of their contract or a repudiatory breach.

In this case, your employee can argue that their contract changed so drastically that they had no other option than to resign. This is known as going to the root of a contract, and the employment tribunal will have to decide whether there was a breach, which is a complex decision to make. Before making any structural changes to your employee’s workplace, you should read over their contract thoroughly to make sure that you are not in breach of its conditions.

Being aware of these constructive dismissal examples can help you to reduce the possibility of your employees making such claims against you at an employment tribunal. The best way to stop employees from making constructive dismissal claims is to avoid breaching their contract. This includes any breach involving reducing payments to your employee, refusing to pay your employee, or drastically changing your employee’s working hours or job description.

Breaches also include those of trust, such as making false allegations against your employee, cases of discrimination and discrimination-based harassment.

If you must make changes to an employee’s contract, then you should get legal advice to help guide you through the process. Make sure that you discuss any significant changes to an employment contract with the relevant employees. All parties are more likely to be satisfied if you can give valid business-related reasons for changes that you make to an employment contract. Familiarise yourself with the Equality Act 2010 and the law surrounding discrimination, and ensure good practices in this respect within your organisation. For example, you could consider creating employee handbooks that include guidance on UK legislation regarding discrimination and equal opportunities.

If things have gone badly and legal action looks like a possibility, you could consider offering the employee a settlement agreement to avoid a constructive dismissal case. Your employee cannot claim constructive dismissal if you have already reached a settlement agreement with them for their departure. Related: How To Reduce Employee Turnover

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