CHAPTER ONE – DEFINITION
Constructive dismissal occurs where the employer does not dismiss the employee, but the employee resigns and can show that they were entitled to do so by virtue of the employer’s conduct.
Constructive Dismissal – Common law
The usual starting point for considering a constructive dismissal claim is the Court of Appeal case of Western Excavating (EEC) LTD v Sharp1. Lord Denning MR set out the principles in paragraphs 15 and 21:
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. He is constructively dismissed.
The employee is entitled in those circumstances to leave at the instant without giving any notice at all or, alternatively, he may give notice and say he is leaving at the end of the notice. But the conduct must in either case be sufficiently serious to entitle him to leave at once.
Moreover, he must make up his mind soon after the conduct of which he complains: for, if he continues for any length of time without leaving, he will lose his right to treat himself as discharged. He will be regarded as having elected to affirm the contract.
In this case, Mr Sharp was employed by the China Clay Company for 20 months. One of the terms of his contract was that he worked overtime in return for time off in lieu. In February 1976 he asked for 3 hours off from work to play a card game for a team. The foreman refused his request, but he took the time off anyway. The following day the foreman dismissed Mr Sharp with 2 weeks’ notice for failing to carry out a reasonable order. Mr Sharp appealed to a panel and they changed the decision to a suspension of 5 working days without pay. Mr Sharp could not meet his expenses over the 5-day period and asked his employers for an advance on his accrued holiday pay, to which they refused. He then asked for a loan and was also refused the amount requested. Mr Sharp resigned in order to get his holiday pay immediately. He made a Tribunal claim for constructive unfair dismissal. This succeeded and he was awarded £658.
Western Excavating’s appeal to the EAT was dismissed. On further appeal to the Court of Appeal, it was held that the question to be answered was whether this was in fact constructive dismissal in the context of the wording used in section 95(1) (c) Employment Rights Act 1996, e.g. ‘entitled’ and ‘without notice’.
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. The employer must act reasonably in his treatment of his employees. If he conducts himself or his affairs so unreasonably that the employee cannot fairly be expected to put up with it any longer, the employee is justified in leaving. The test is however one of contract, not one of reasonableness.
If an employee terminates the contract by reason of the employer’s conduct, then he is constructively dismissed. The employee is entitled in these circumstances to leave instantly without giving any notice at all, or alternatively he may give notice and say he is leaving at the end of the notice.
The conduct must in either case be sufficiently serious to entitle him to leave at once and he must make up his mind soon after the conduct of which he complains happens. If he continues for any length of time without leaving, he will lose his right to treat himself as discharged.
It was held that the correct test was the contract test because of the legal wording, and they found that the employer did not breach the contract. There would have to be conduct which could bring a contract of employment to an end, which did not exist in this case. Mr Sharp had been guilty of misconduct at work. The Court of Appeal held that the Tribunal decision was a perverse decision based on whimsy and sentimentality and therefore the appeal was allowed.
In summary, the necessary elements to be established for constructive dismissal are:
Repudiatory breach of the employer;
An election by the employee to accept the breach and treat the contract as at an end; and
The employee must not delay too long in accepting the breach, as it is always open to an innocent party to waive the breach and treat the contract as continuing.
Constructive dismissal – Statutory definition
Section 95 (1)(c) Employment Rights Act 1996 states:
(1) For the purposes of this Part an employee is dismissed by his employer if (and subject to subsection (2) ….. only if-
(c) 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.
Fundamental breach: terms going to the root of the contract
Fundamental terms of the contract that an employer may breach include cuts in pay or working hours or breaches of the implied terms of trust and confidence or the duty to provide a safe working environment.
It should be relatively straightforward for the employee to prove that the employer has breached a fundamental term of their contract when it relates to cuts in pay or hours. It is more difficult to prove constructive dismissal claims based on breaches of trust and confidence and employees must take care before deciding to resign and claim constructive dismissal on this basis. The courts have found the following breaches of contract to be sufficiently serious to entitle the employee to resign and claim constructive dismissal:
Reduction in pay or hours.
Changes in employment duties or employment status.
Changes in location where there is no mobility clause in the contract.
Changes in job responsibilities.
Not providing work that the employee is employed to do.
Change in status.
Failure to address a grievance.
Unlawful discrimination and victimisation.
Inept handling of disciplinary matters.
Intolerable working environment.
Non-compliance with relevant statutory provisions.
Breach of the implied term of trust and confidence.
Arbitrary, capricious, inequitable behaviour.
Singling out employee and treating them adversely to others.
1  IRLR 27