Constructive dismissal
Encyclopedia
In employment
law
, constructive dismissal, also called constructive discharge, occurs when employees resign
because their employer's behaviour has become so intolerable or heinous or made life so difficult that the employee has no choice but to resign. Because the resignation was not truly voluntary, it is in effect a termination. For example, when an employer makes life extremely difficult for an employee to attempt to have the employee resign rather than outright firing the employee, the employer is trying to effect a constructive discharge.
The exact legal consequences differ between different countries, but generally a constructive dismissal leads to the employee's obligations ending and the employee acquiring the right to make claims against the employer. For example in the United Kingdom, a claim for "unfair dismissal
" and a claim for "wrongful dismissal
" may arise.
The employee may resign over a single serious incident or over a pattern of incidents. Generally, the employee must have resigned soon after the incident.
In the United Kingdom, the notion of constructive dismissal comes from the concept that (as it is phrased in United Kingdom
law) "An employer must not, without reasonable or proper cause, conduct himself in a manner calculated or likely to destroy or seriously damage the relationship of trust and confidence between the employer and the employee." (Courtaulds Northern Textiles Ltd v Andrew [1979] IRLR 84, EAT.)
"In order to establish a constructive discharge, an employee must plead and prove, by the usual preponderance of the evidence standard, that the employer either intentionally created or knowingly permitted working conditions that were so intolerable or aggravated at the time of the employee's resignation that a reasonable employer would realize that a reasonable person in the employee's position would be compelled to resign."
Turner v. Anheuser-Busch, Inc., 7 Cal. 4th 1238, 1251, 876 P.2d 1022 (1994).
law, constructive dismissal is defined by the Employment Rights Act 1996
section 95(1)c:
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.
The Department of Trade and Industry states http://www.berr.gov.uk/employment/employment-legislation/employment-guidance/page31082.html#Constructive_dismissal:
At common law the requirement is acceptance of a repudiatory breach, which means the employer has indicated it no longer considers itself bound by an essential term of the contract, e.g. the requirement to pay wages or the requirement not to destroy the mutual bond of trust and confidence. It matters not if the employer did not mean to repudiate the contract.
Under statute the requirement is employer's "conduct" allowing the employee to "terminate without notice"; as this can only happen with a repudiatory breach it amounts to the same thing.
A constructive dismissal occurs when the employer's serious breach causes the employee to accept that the contract has been terminated, by resigning. The fairness of it would have to be looked at separately under a statutory claim for unfair dismissal.
The problems for the employer are that constructive dismissal is a contractual claim, which can be made in a tribunal for up to £25,000 or in court without limit, and, by dismissing constructively, it by definition misses out on the correct procedure meaning that even if the reason was fair, the decision was probably not, and so an unfair dismissal usually arises, creating a statutory claim alongside the contractual claim.
The court can look behind the lack of, or different, stated reason given by the employee at the time of resignation to establish that a cover story was in fact a resignation caused by fundamental breach.
A flexibility clause does not allow the employer to change a type of job as it is implied that the flexibility is to operate within the original job.
A mobility clause is subject to the implied term of mutual trust which prevents the employer from sending an employee to the other side of the country without adequate notice or from doing anything which makes it impossible for the employee to keep his side of the bargain.
An employee who stays on for a year after refusing to sign a new contract does not necessarily accept it.
To prevent the employer alleging that the resignation was caused by a job offer, the employee should resign first and then seek a new job during the notice period.
During the notice period, the employer could make the employee redundant or summarily dismiss him, if it has the grounds to do so fairly, otherwise the reason for termination will be resignation and not dismissal, since the employee cannot serve a counternotice.
Employment
Employment is a contract between two parties, one being the employer and the other being the employee. An employee may be defined as:- Employee :...
law
Law
Law is a system of rules and guidelines which are enforced through social institutions to govern behavior, wherever possible. It shapes politics, economics and society in numerous ways and serves as a social mediator of relations between people. Contract law regulates everything from buying a bus...
, constructive dismissal, also called constructive discharge, occurs when employees resign
Resignation
A resignation is the formal act of giving up or quitting one's office or position. It can also refer to the act of admitting defeat in a game like chess, indicated by the resigning player declaring "I resign", turning his king on its side, extending his hand, or stopping the chess clock...
because their employer's behaviour has become so intolerable or heinous or made life so difficult that the employee has no choice but to resign. Because the resignation was not truly voluntary, it is in effect a termination. For example, when an employer makes life extremely difficult for an employee to attempt to have the employee resign rather than outright firing the employee, the employer is trying to effect a constructive discharge.
The exact legal consequences differ between different countries, but generally a constructive dismissal leads to the employee's obligations ending and the employee acquiring the right to make claims against the employer. For example in the United Kingdom, a claim for "unfair dismissal
Unfair dismissal
Unfair dismissal is the term used in UK labour law to describe an employer's action when terminating an employee's employment contrary to the requirements of the Employment Rights Act 1996...
" and a claim for "wrongful dismissal
Wrongful dismissal
Wrongful dismissal, also called wrongful termination or wrongful discharge, is an idiom and legal phrase, describing a situation in which an employee's contract of employment has been terminated by the employer in circumstances where the termination breaches one or more terms of the contract of...
" may arise.
The employee may resign over a single serious incident or over a pattern of incidents. Generally, the employee must have resigned soon after the incident.
In the United Kingdom, the notion of constructive dismissal comes from the concept that (as it is phrased in United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
law) "An employer must not, without reasonable or proper cause, conduct himself in a manner calculated or likely to destroy or seriously damage the relationship of trust and confidence between the employer and the employee." (Courtaulds Northern Textiles Ltd v Andrew [1979] IRLR 84, EAT.)
United States law
In the United States, constructive discharge has differing meanings depending on the jurisdiction. In California, the California Supreme Court defines constructive discharge as follows:"In order to establish a constructive discharge, an employee must plead and prove, by the usual preponderance of the evidence standard, that the employer either intentionally created or knowingly permitted working conditions that were so intolerable or aggravated at the time of the employee's resignation that a reasonable employer would realize that a reasonable person in the employee's position would be compelled to resign."
Turner v. Anheuser-Busch, Inc., 7 Cal. 4th 1238, 1251, 876 P.2d 1022 (1994).
UK law
In United KingdomUnited Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
law, constructive dismissal is defined by the Employment Rights Act 1996
Employment Rights Act 1996
The Employment Rights Act 1996 is a United Kingdom Act of Parliament passed by the Conservative government to codify the existing law on individual rights in UK labour law. Previous statutes, dating from the Contracts of Employment Act 1963, included the Redundancy Payments Act 1965, the...
section 95(1)c:
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.
The Department of Trade and Industry states http://www.berr.gov.uk/employment/employment-legislation/employment-guidance/page31082.html#Constructive_dismissal:
- A tribunalTribunalA tribunal in the general sense is any person or institution with the authority to judge, adjudicate on, or determine claims or disputes—whether or not it is called a tribunal in its title....
may rule that an employee who resigns because of conduct by his or her employer has been 'constructively dismissed'. For a tribunal to rule in this way the employer's action has to be such that it can be regarded as a significant breach of the employment contract indicating that he or she intends no longer to be bound by one or more terms of the contract: an example of this might be where the employer arbitrarily demotes an employee to a lower rank or poorer paid position. The contract is what has been agreed between the parties, whether orally or in writing, or a combination of both, together with what must necessarily be implied to make the contract workable.
Types of constructive dismissal
Although they tend to mash into one in a tribunal, strictly there are two types of constructive dismissal: statutory and common law.At common law the requirement is acceptance of a repudiatory breach, which means the employer has indicated it no longer considers itself bound by an essential term of the contract, e.g. the requirement to pay wages or the requirement not to destroy the mutual bond of trust and confidence. It matters not if the employer did not mean to repudiate the contract.
Under statute the requirement is employer's "conduct" allowing the employee to "terminate without notice"; as this can only happen with a repudiatory breach it amounts to the same thing.
Relation to unfair dismissal
A common mistake is to assume that constructive dismissal is exactly the same as unfair treatment of an employee - it can sometimes be that treatment that can be considered generally evenhanded nevertheless makes life so difficult that the employee is in essence forced to resign (e.g., a fair constructive dismissal might be a unilateral change of contract justified by a bigger benefit to the business than the inconvenience to the employee), but the Employment Appeal Tribunal doubts that it will be very often that the employer can breach ERA96 s98(4) whilst being fair.A constructive dismissal occurs when the employer's serious breach causes the employee to accept that the contract has been terminated, by resigning. The fairness of it would have to be looked at separately under a statutory claim for unfair dismissal.
The problems for the employer are that constructive dismissal is a contractual claim, which can be made in a tribunal for up to £25,000 or in court without limit, and, by dismissing constructively, it by definition misses out on the correct procedure meaning that even if the reason was fair, the decision was probably not, and so an unfair dismissal usually arises, creating a statutory claim alongside the contractual claim.
The court can look behind the lack of, or different, stated reason given by the employee at the time of resignation to establish that a cover story was in fact a resignation caused by fundamental breach.
Typical causes
The person causing the dismissal does not need the authority to dismiss, as long as they acted in the course of employment.Grounds
Constructive dismissal is typically caused by:-- unilateral contract changes by the employer such as:
- deliberate cuts in pay or status (even temporary),
- persistent delayed wages,
- refusal of holiday,
- withdrawal of car,
- suspension without pay (or even on full pay),
- dramatic changes to duties, hours or location (beyond reasonable daily travelling distance), or
- breach of contract in the form of bullying, e.g.:
- ignoring complaints,
- persistent unwanted amorous advances,
- bullying and swearing,
- verbal abuse (typically referring to gender, size or incompetence),
- singling out for no pay rise,
- criticising in front of subordinates,
- lack of support (e.g. forcing to do two peoples' jobs),
- failure to notify a woman on maternity leave of a vacancy,
- refusal to confirm continuity on TUPE transfer,
- revealing secret complaints in a reference (even ones required by a regulator), or
- breaches such as:
- behaviour which is arbitrary, capricious, inequitable, intolerable or outside good industrial practice,
- offering an incentive to resign to avoid performance managing capability,
- refusal to look for an alternative role due to workplace stress,
- disproportionate disciplinary penalty,
- employer cons employee into resigning.
Flexibility and mobility clauses
A flexibility clause does not allow the employer to change a type of job as it is implied that the flexibility is to operate within the original job.
A mobility clause is subject to the implied term of mutual trust which prevents the employer from sending an employee to the other side of the country without adequate notice or from doing anything which makes it impossible for the employee to keep his side of the bargain.
Insufficient grounds
There is no right to automatic pay rises. Nor is a smoking ban a breach.Compensation
The employee's conduct is irrelevant to liability, although it can affect quantum; in other words it cannot get the employer off the hook, but could reduce compensation if he helped bring about his own downfall.Timing
The conduct by the employer could be:- a one-off serious breach of contract,
- anything to the employee's detriment (not necessarily a breach of contract) that acts as a last straw after a string of serious breaches,
- a serious breach that acts as the last straw after a string of less serious breaches, or
- a string of less serious breaches related in time and nature that add up to a serious breach (random mistakes over the years are not enough - it would be more like a sustained campaign to undermine).
Employee must resign quickly
The employee has to resign within a reasonable time of the trigger, which is the one-off outrage or the last straw. The employee could work under protest while he or she finds a new job.Waiver
If the employer alleges that the employee waived a breach by not resigning, each breach needs to be looked at to see if it was waived separately, but even if a breach was waived, the last straw revives it for the purpose of determining whether overall there was a repudiation.Affirmation
If the employer alleges that the employee has affirmed a breach by not resigning, the employee could point out that no consideration was paid for it and so no contract change has been accepted. Acceptance of a replacement job would prove affirmation.An employee who stays on for a year after refusing to sign a new contract does not necessarily accept it.
Last straw
The last straw does not have to be similar to the earlier string of events or even unreasonable or blameworthy - it need only be related to the obligation of trust and confidence and enough that when added to the earlier events the totality is a repudiation.Notice period
Although the employer's breach must be serious enough to entitle the employee to resign without notice, the employee is entitled to give notice if he prefers, so could enjoy the benefit of wages during the notice period.To prevent the employer alleging that the resignation was caused by a job offer, the employee should resign first and then seek a new job during the notice period.
During the notice period, the employer could make the employee redundant or summarily dismiss him, if it has the grounds to do so fairly, otherwise the reason for termination will be resignation and not dismissal, since the employee cannot serve a counternotice.