It is surprising how many originating applications to the tribunal include a claim for “constructive dismissal”. There is still wide spread belief that constructive and unfair dismissal are one and the same. In fact, the concept of constructive dismissal is not a legal claim at all, but a state of affairs which, if it exists, can turn the unreasonable behaviour or breaches of contract by an employer into a dismissal.
Breach of contract
The 1978 Decision of the Court of Appeal in the Sharp case placed the common law doctrine of fundamental breach of contract at the heart of the concept of constructive dismissal for employment purposes. The argument is as follows: if an employer acts so as to breach a fundamental term in the contract of employment, or makes it clear that it will do so (“anticipatory breach”), this operates as an “offer” to the employee to terminate the contract with immediate effect, albeit in breach of the notice provisions. It is then up to the employee to decide whether or not to accept that offer and so end the contract, without prejudice to any rights which the employee may have against the employer in respect of the immediate termination.
For employment law purposes, that immediate termination operates as a dismissal, giving the employee the potential right to claim unfair dismissal under the Employment Rights Act 1996 (subject to the usual criteria for eligibility) and wrongful dismissal.
Wrongful dismissal (also confused with constructive dismissal) is a claim for the net benefits the employee should have received under the contract of employment had it been terminated in accordance with the notice provisions in the contract, or, in their absence, reasonable notice subject to the statutory minimum period of notice.
Accepting the offer and terminating may often be a drastic step for the employee to take, leaving them with potential legal claims, but without a job or income from the date of acceptance. This is why employees will often use arguments based on constructive dismissal in negotiations, rather than accepting the offer and opting instead to rely on the legal claims arising out of constructive dismissal.
Examples of constructive dismissal
Should the employer fail to pay the employee, or unilaterally seek to reduce salary, this will almost certainly be a constructive dismissal. It will also occur if an employer unilaterally alters the basis upon which commission or bonus is earned, or alters contractual benefits. Changing an employee’s status or job duties can often cause a constructive dismissal, particularly where the contract gives the employer little or no flexibility in these circumstances. This is the case even if pay and benefits remain the same. Other examples include a failure to provide a safe system of work or suitable work environment and a failure to uphold the duty of mutual trust and confidence.
Alleging constructive dismissal can be helpful to an employee who wishes to leave an employer to work for a competitor. If the employee can demonstrate that a constructive dismissal has occurred, they can leave immediately to work elsewhere, on the grounds that an employer may not enforce a contract of which it is in breach. In such circumstances, the employer cannot put the employee on garden leave and is thus powerless to prevent competitive activity.