Constructive dismissal

Stephen SimpsonEditor's message: Under unfair dismissal laws, an employee is entitled to resign in response to a fundamental breach of the contract of employment by his or her employer. This means that, although the employer has not dismissed the employee, the termination of the employment contract is treated as a dismissal.

You should be alert to the common breaches of contractual terms, both express and implied, that can lead employees to resign and argue that you have constructively dismissed them. A common example of a fundamental breach of an express term is unilaterally cutting an employee's pay or hours without the contractual power to do so. A breach of the implied term of trust and confidence could occur if you fail to investigate a grievance properly or turn a blind eye to allegations of bullying and harassment.

The best way to minimise the risk of constructive dismissal claims against your organisation is have procedures that prevent fundamental breaches from occurring in the first place. These include a process for varying employees' terms and conditions; a grievance procedure; and a dignity at work policy. Under these procedures, you should consult properly with employees on significant variations to their terms and conditions; follow a fair and timely procedure when an employee raises a grievance; and fully investigate allegations of bullying and harassment.

If these preventative measures do not work and an employee resigns, your organisation may have a defence against a constructive dismissal claim. There may be circumstances in which the employee waited too long before resigning and implicitly accepted your organisation's actions by failing to act sooner. You may also be able to show that the employee really resigned for a reason unrelated to the alleged breach of contract - this could be the case where the employee resigns in response to a job offer elsewhere, but brings a constructive dismissal claim as an afterthought.

Stephen Simpson, principal employment law editor

New and updated