Constructive Dismissal - A Path to Protection Littered with Obstacles?

There are a lot of names for it: dismissal; sacking; letting go; termination; etc.; but the truth is that when a contract for employment is terminated between an employer and employee a number of social and economic factors come into play. Theoretically, dismissal gives employers the opportunity to ensure they have an optimal task force and “sub-optimal workers” (for want of a better phrase) do not become a financial strain. On the other hand, dismissal usually has a devastating impact on employees who lose not only their incomes but also their reputations and credibility. It is for this latter reason that employment law governs unfair dismissal with sanctions for the employer (usually compensatory in nature) which are designed to discourage dismissal where doing so would be for unfair reasons. But, what happens where the employer attempts to avoid being penalised for “unfair dismissal” by instead treating the employee in such a way as to force them to resign? Employment law caters for this too in the guise of “constructive dismissal”. However, up until the recent case of Wright v North Ayrshire Council [2013] EAT (“Wright”), constructive dismissal proved of limited use to aggrieved employees.

Whilst Section 94 of the Employment Rights Act 1996 (ERA 1996) sets out the general right that employees have not to be dismissed, the definitions of what constitutes dismissal are found in Section 95. Section 95(1)(c) states:

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.

Constructive dismissal is therefore the process whereby an employee resigns by virtue of the actions of his employer. There are several problems in relation to constructive dismissal. However, the extract from the ERA 1996 set out above does not provide any clarification of the type of conduct of the employer or the threshold that will trigger a constructive dismissal claim. Case law, however, has been of assistance. In the case of Western Excavating (ECC) Ltd v Sharp [1978] ICR 221 Lord Denning noted:

“If the employer is guilty of conduct which is a significant breach going to the root of the contract of employment, or which shows that the employer no longer intends to be bound by one or more of the essential terms of the contract, then the employee is entitled to treat himself as discharged from any further performance. If he does so, then he terminates the contract by reason of the employer’s conduct.”

Proving one has been constructively dismissed is not enough to grant an employee compensation for the acts of his employer; the employee is then tasked with demonstrating that the reason was unfair, an allegation an employer can easily rebut by arguing the dismissal, or the actions of the employer that led to the resignation, fell within the wide examples of fair factors that are outlined under Section 98 of the said Act.

Furthermore, there are a number of other factors that have traditionally made constructive dismissal difficult to demonstrate. For example, when an employer has acted in a way that would cause an employee to resign and claim constructive dismissal, a delay between the actions of the employer and resignation such actions trigger may be construed by the tribunals as an acceptance of the employer’s conduct by the employee, thus barring a claim for constructive dismissal (Walton & Morse v Dorrington [1997] IRLR 488). This is difficult for an employee; resignation without a new job to walk into is risky and employees may therefore delay a resignation in light of such dangers. Case law has in a sense helped somewhat by holding that if an employee continues to work but does so in protest the delay will not be fatal to a claim for constructive dismissal. Furthermore, the a more liberal and employee-friendly approach started emerge with the likes of cases such as ElHoshi v Pizza Express Ltd. [2004] All ER (D) 295 whereby the appeal tribunal noted that calling in sick following adverse conduct by the employer, whilst arguably conduct that would form part of the employment relationship, was not to be seen as an implied acceptance of the employer’s conduct in the same way that delay without protest and continuation of work may be.

In Wright, the Employment Appeal Tribunal (EAT) has somewhat further increased the accessibility of constructive dismissal claims by holding that a claim will be successful even if the employer’s conduct was not the sole reason for resignation, so long as it was a contributing factor it need not be the principal. Wright had resigned for a combination of personal circumstances and the conduct of the employer, the latter had been such that it could be held that the its breach was so fundamental as to demonstrate that the employer no longer wished to be bound by the contract of employment. The Employment Tribunal, the court of first instance, held that the combination of factors meant a claim for constructive dismissal against Wright’s employers could not be successful; this was overturned by the EAT. The EAT has pointed out that the correct approach that have be taken by the tribunal of first instance is to reduce to level of unfair dismissal compensation that can be awarded where there were a combination of factors to which the employer’s conduct was just one element. This means, however, that where Wright would have resigned regardless of the employer’s actions due to her personal circumstances she may be entitled to no compensation as it may be regarded that the actions of the employer have not caused her a loss.

Jay Gajjar

This blog is intended for reference only. The author and London Law Tutor Ltd. cannot guarantee its accuracy and accept no liability for the consequences following from its use. 

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