Constructive Dismissal

Constructive dismissal occurs when an employee resigns in response to their employer's fundamental breach of the employment contract. Although the employee resigns, the law treats it as a dismissal because the employer's conduct left the employee with no reasonable alternative.

The legal test (Western Excavating v Sharp) requires: a fundamental breach of contract by the employer (express or implied terms), the employee resigned in response to that breach (not for some other reason), and the employee did not delay too long before resigning (which could be treated as acceptance of the breach).

Common grounds include: unilateral reduction in pay or changes to terms, bullying or harassment by managers or colleagues that the employer fails to address, failure to address grievances, demotion without consent, creating an intolerable working environment, and breach of the implied term of mutual trust and confidence.

The employee should usually raise a formal grievance before resigning, as failure to do so may result in a reduction in compensation under the ACAS Code of Practice. However, there is no absolute requirement to grieve first, particularly if the employer's conduct makes it pointless.

Constructive dismissal claims require 2 years' qualifying service (unless the reason engages automatically unfair dismissal grounds). Compensation includes the basic award and compensatory award. The time limit is 3 months less 1 day from the date of resignation. Claims typically settle for £10,000 to £100,000, depending on salary and length of service.