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Constructive unfair dismissal: 2014 update

Constructive unfair dismissal is a topic which strikes fear into many employers’ hearts.  Usefully, recently the Tribunals have provided us with some guidance on this notoriously complex area of law dealing with the following two key points:

  • Motives for the employee’s resignation; and
  • Contributory conduct of the employee.

In order to reduce the risks of such claims employers need to be aware of what would justify an employee resigning and making a claim for constructive unfair dismissal – prevention is always better than cure!  However, should such a claim be brought against your business it doesn’t hurt to understand what the cure (or at least the painkiller) may be!

Motives for resignation

In order to bring a successful claim, the employee must have resigned.

They also must be able to establish that the employer fundamentally breached their contract of employment and that breach justified their resignation.

Finally, there is a long-standing principle that the employee must have resigned as a “direct result” of the employer’s breach.  It is relating to this last hurdle that the Employment Appeal Tribunal (EAT) has given guidance.

The EAT has ruled that the employer’s fundamental breach, or breaches, of the employee’s contract (which can include breaching the implied term of trust and confidence) need not be the sole, principal or even the main reason for the employee’s resignation.  It is sufficient for the fundamental breach or breaches to be “an effective cause”.

This means that there is no requirement for the fundamental breach or breaches to be the most important reason for resignation in order for an employee to be successful in their claim for constructive unfair dismissal.

If there is more than one cause for the resignation then the other causes can be considered by the Tribunal when they are assessing the amount of compensation due to the Claimant.  Compensation may be reduced after considering this.

Why do I need to know this?

It is important for employers to be aware of any potential fundamental breaches of employees’ contracts of employment and the effect that these may have on their employees.  Gone is the comfort blanket of there being other reasons for an employee’s resignation (for example having another job to move to) protecting employers from these claims.

Any complaints or grievances raised by employees ought to be dealt with thoroughly and properly, in line with your own grievance procedure and the Acas Code.  This will help you bottom out and potential issues before they escalate.

Contributory conduct

What if an employee’s conduct has contributed to the fundamental breach by the employer that leads to the employee’s resignation?

Well, a Tribunal cannot consider an employee’s contribution when deciding whether an employee has been constructively dismissed.  It is only open to them to consider it when it comes to deciding the amount of compensation to award.

So, a successful employee’s compensation could be reduced to take into account any contribution that their conduct played in the constructive unfair dismissal.

For example, if an employee resigned in response to the following:

  • Their performance had not been up to scratch.
  • The employer dealt with the performance process wholly unfairly.
  • The Claimant resigned in response to the unreasonable performance process.

In this situation, the unreasonable performance process was “an effective” reason for the resignation and so there would be a finding of constructive unfair dismissal.  However, if the employee’s performance had been satisfactory, no such process would have been required.

Therefore the employee’s conduct (i.e. their poor performance) did contribute towards the breach (i.e. the unreasonable process which would not have occurred but for the poor performance).  In this case, the Tribunal can reduce the employee’s compensation.

Why do I need to know this?

This may well be closing the door once the horse has bolted.  We would always advise doing all you can as an employer to reduce the risks, costs and time taken up in having to defend claims of constructive unfair dismissal.  However, that is not always possible, so good to know that there are protections you can rely on if you face Tribunal proceedings.

For more information on constructive unfair dismissal, please contact our Employment & HR team.

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