Dear Hrlaw Auntie

I am the HR Manager of a large company and a few days ago one of our fairly senior employees, Paul, came to see me to tell me that he was leaving … immediately. I told Paul that he had to serve three months’ notice under his contract of employment but he told me that he was not staying one moment longer. He gave me his security pass and practically ran out of the door.

I had spoken to Paul on the telephone earlier today and he told me that he could not be expected to put up with his line manager, Roger, anymore. Paul said that Roger has always “had it in for him”. He told me that Roger continually undermines his authority in front of other members of staff and always finds something to criticise about his work. Paul told me that on a number of occasions Roger has called him a “f****** idiot who can’t do the b***** job anyway”. Roger does tend to swear a lot but no-one else has ever taken it personally. The last straw apparently came on Monday when Paul was due to give a presentation to some important clients and Roger ordered him to “make the tea”.

Paul told me he has sought legal advice and he believes that he has been ‘constructively dismissed’ which means that we have breached his contract of employment entitling him to claim damages from us as well as compensation of £55,000 for dismissing him.

We are worried about Paul making a claim but do not understand on what basis he can do so and why he says we will have to pay him £55,000. We did not dismiss Paul – he walked out! If anyone broke the contract of employment it was Paul. We also think that Paul might have an alternative job lined up, possibly with a competitor, and that he has been waiting for an excuse to leave without having to serve notice.


Confused about Constructive Dismissal


Dear Confused

You are not alone! Constructive dismissal is a very tricky area of law. Proving constructive dismissal is difficult – there are a number of hurdles to get over – but so is defending this type of claim.

What is constructive dismissal?

An employee is constructively dismissed when he resigns because of the employer’s conduct. In these circumstances an employee is entitled to terminate his contract of employment without notice. This means that Paul does not have to serve the three months’ notice required by his contract.

Proving constructive dismissal

If Paul does bring a claim for constructive dismissal he will need to show that:

* the company was in breach of an express or an implied term of his contract of employment;

* the breach was fundamental or the last in a series of incidents which justifies his leaving;

* he left because of this breach; and

* he has not waived the breach (an employee only has a reasonable time to consider his position. If he waits too long he is regarded as having waived the breach and cannot resign and claim constructive dismissal).

It is unlikely that the company has breached an express term of Paul’s contract, although I am sure that ‘making the tea’ does not form part of his job description. Unless there is an argument that Paul has been demoted and his duties unilaterally changed, which is unlikely, Roger’s order to ‘make the tea’ is probably not sufficient to amount to a breach of an express contractual term.

Constructive dismissal claims also arise where the employer breaches one of the terms that are implied into every contract of employment. The most common implied term used in claims of constructive dismissal is a breach by the employer of the duty of trust and confidence – both employer and employee owe each other a duty not to “without reasonable and proper cause conduct themselves in a manner calculated or likely to destroy or seriously damage the relationship of confidence and trust between the parties”.

Paul’s claim is likely to be that the company has breached this implied term and that the order to ‘make the tea’ was the “last straw” when viewed against a background of other similar incidents. If Paul can prove that the relationship of trust and confidence has been broken this will be regarded by the tribunal as a repudiatory breach i.e. so significant as to go to the heart of the contract of employment. Paul will also be able to show that he acted promptly in response to the breach.

The scope of the term not to undermine trust and confidence is extremely wide and it is not necessary for Paul to show that Roger deliberately intended to undermine trust and confidence. Each of the incidents you have described – undermining authority in front of other members of staff, unjustified criticism and swearing – can amount to a breach of this duty. However, this does not mean that employers cannot criticise employees if they are unhappy with their work – on the contrary, there may be circumstances where criticism is appropriate. Each case will have to be considered on its merits. In deciding whether abusive language constitutes a repudiatory breach a tribunal will consider the general atmosphere of the workplace. What may be acceptable on a shop floor may not be acceptable or tolerable in an office environment. That being said, tribunals have said that a blanket approach to profanity in the workplace should not be adopted.

What can Paul claim in terms of compensation?

If Paul issues proceedings against the company he will potentially have two heads of claim: (i) a contractual claim of wrongful dismissal and (ii) a statutory claim of constructive unfair dismissal. In both cases Paul will be under a duty to mitigate his losses by seeking alternative employment so if Paul does have another job then his losses will be minimal.

It is possible that Paul might raise other complaints in conjunction with his constructive dismissal claim – for example, that he has been discriminated against on the grounds of sex, race, disability, sexual orientation, religion or belief.

Wrongful Dismissal

Paul will seek damages from the company for a sum equal to the (net of tax and national insurance) pay and benefits he would have been entitled to receive had he been allowed to work out his notice period. Compensation will therefore normally be limited to what Paul would have received had he worked his three months’ notice.

Constructive Unfair Dismissal

Provided that Paul has been an employee for at least one year he might also have a claim for constructive unfair dismissal (note: there are exceptional circumstances where the one year threshold does not apply). The amount of £55,000 which Paul mentioned is the maximum compensatory award for unfair dismissal claims. Employment tribunals very rarely award the maximum amount and if Paul has got another job which remunerates him at a similar level then he could be awarded nothing or a purely nominal amount.

Not all constructive dismissals will be unfair but if there has been a constructive dismissal an employment tribunal is obliged to consider what the reason for the dismissal was and whether it was fair. This is a difficult concept to comprehend because from an employer’s point of view there has been no dismissal – the employee walked out. However, if you can successfully argue one of the potentially fair reasons for dismissal this would render the dismissal ‘fair’ and reduce the amount of compensation awarded.

You could argue that Paul was not capable of doing the job but if Roger genuinely had concerns about Paul’s performance he ought to have raised these and discussed them with Paul so that Paul knew what was expected of him and how he might improve. You might also be able to argue that the reason for Paul’s dismissal was for ‘some other substantial reason’ e.g, a clash of personalities between Paul and Roger.

Even if you give a reason for the dismissal an employment tribunal might substitute your reason with what it perceives to be the real reason. This can have serious implications – particularly a finding that the reason was discrimination where compensation is uncapped and publicity is certain to be generated.

Paul’s alternative job

Previous case law suggested an employee had to show that the repudiatory breach was the underlying effective cause of the resignation but this has now been overruled by the Court of Appeal in the case of Nottinghamshire County Council v Meikle. In that case the Court said it did not matter that there were factors other than the repudiatory breach which caused Ms Meikle to resign – it was enough that she resigned in response at least in part to fundamental breaches of contract. This means that if Paul left partly because of Roger’s conduct and partly because of the alternative job offer, he will still be able to bring a claim for constructive dismissal.

You will also need to bear in mind that if the company has breached Paul’s contract of employment any post-termination restrictive covenants are likely to fall away on the grounds that the company cannot enforce a contract of which it is in breach. The company therefore will probably not be able to stop Paul from working for a competitor.

Minimising the risk

Constructive dismissal is a growing problem and the Courts have come close to accepting that an employer is under a duty to behave reasonably towards its employees. Roger’s management style – which could be perceived as aggressive and intimidating – could prove costly for the company. This was seen in Horkulak v Cantor Fitzgerald where Cantor Fitzgerald was ordered to pay Mr Horkulak (who had been constructively dismissed) over £900,000 in compensation. To minimise the chances of such costly mistakes happening at your company you should check that you have appropriate policies in place for dealing with capability issues and problem employees and speak to Roger about the importance of following those procedures. You might also offer Roger some management training. You need to speak to Roger about his language. Swearing might be his way of letting off steam but others might find it demoralising and humiliating – particularly if Roger is their superior. There is a difference between colleagues swearing amongst themselves and a superior screaming at a member of his staff. Aside from the formal processes, employers are well advised to keep their ear to the ground as to what is happening on the grapevine – an informal chat with a disgruntled employee early on might knock the matter on its head before it is too late.

The new statutory disciplinary and grievance procedures came into force on 1 October 2004 which means that where an employee has concerns about his employer’s actions which could give rise to a constructive dismissal complaint, that employee will now be expected to follow the standard grievance procedure. This is good news for employers because it puts pressure on employees to attempt to resolve differences before litigating. Furthermore, walking out of a job and claiming constructive dismissal will be a drastic step for any employee to take because unless they have another position to go to they will be without a job or income. They will also have to fund any litigation if they want to assert their legal rights.

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