Constructive Dismissal

First published on Thursday, Jun 04, 2020

Last updated on Friday, Jul 15, 2022

Whether it be termination, resignation, or retirement - employees will leave your company.

However, you can't make changes that force someone to resign from their role. You have a duty of care to treat your employees fairly, and constructively dismissing someone isn't acceptable.

Constructive dismissal can lead to a legal battle with potential compensation to pay.

In this guide, we'll discuss what constructive dismissal is, which actions lead to this type of dismissal, and, how to ensure it doesn't happen in your company.

What's Constructive Dismissal?

Constructive dismissal is when an employee resigns following a breach of an employment contract or a change to the employment relationship's terms by the employer.

Also known as disguised dismissal, this type of dismissal is a resignation forced following the employer making substantial changes to someone's employment.

These changes can be sudden or made over reasonable time, but ultimately makes the employee's position untenable to work in. They have a choice, either accept the fundamental change or risk being fired.

How Are Employees Constructively Dismissed?

Employees are dismissed this way solely down to the actions of the employer. The employer creates a unilateral and substantial alteration to someone's employment - leaving them with no choice but to resign.

You need to be aware of what changes can constitute constructive dismissal.

Can an Employer Make Changes to an Employment Contract?

Employment law sets terms under common and statutory law that apply to all employees, such as receiving wages. These are specified as part of their contract and agreed to before employment starts.

Constructive dismissal occurs when changes are made to a fundamental term of an employee's contract without their direct or implied consent - whether the employee signed a written contract or not.

As an employer, you should avoid making changes to reduce the following:

  • Working hours.
  • Benefits, such as vacation pay, and overtime pay.
  • Lowering an employee's compensation, such as bonuses and commission (reduced compensation can have a huge impact on their financial stability).

Employers can make changes to employment contracts, but reasonable notice should be provided before the change is made.

What are Specific and Implied Terms?

Specific terms are terms which are stated in an employment contract, such as pay. An implied term is a term which naturally should happen, for example - providing a safe place to work.

Can an Employer Make Changes to Employee's Duties?

You should avoid making changes to the following:

  • An employer substantially increasing or decreasing a workload, to such a degree is makes it unmanageable and unattainable.
  • Demoting an employee and handing their job to someone else.
  • Changing an employee's reporting structure and job description.
  • Making changes to someone's duties which form part of their day-to-day role.

Workloads changing is sometimes unavoidable, but make sure you have a conversation with the employee about how best to manage the situation.

Is Making Threats Constructive Dismissal?

As an employer, you must avoid making threats to terminate staff, increase workloads or deny breaks. This is against the law and can be seen as a factor in a constructive dismissal case.

Unfair treatment towards your employees should also be avoided at all costs, it could leave them feeling victimized and wanting to resign.

As well as that, you must not make vague and unfounded accusations of poor performance or unjustified criticism. This can make employees feel isolated, uncomfortable, and alone whilst at work.

Can Employers Change Working Conditions?

As an employer, you must avoid making changes to the workplace which can make it unsafe.

You have a duty of care to provide your staff with a safe place to work and any safety equipment that may be required for them to do their job, such as safety boots in a manufacturing environment.

If an employer's conduct leads to employees feeling unsafe at work - this could lead to resignations and constructive dismissal.

Creating a Toxic Work Environment

Employers can sometimes create or allows the creation of a hostile and/or toxic work environment. This can be done via the following:

  • Employer fails to prevent workplace harassment
  • Employer fails to prevent sexual harassment.
  • Little or no enthusiasm for work.
  • There's an overriding fear of failure.
  • Employer fails to stop workplace bullying.
  • Employer allows high employee turnover.

If a working environment is so toxic that a reasonable person wouldn't want to return to it - then it's likely constructive dismissal will happen.

Can an Employer Change the Working Location?

The relocation of an employee's workplace can trigger constructive dismissal. You must not relocate someone to a different location which is particularly difficult for them to get to – without reasonable notice being given.

Failure to avoid making negative changes to an employee's employment can lead to an employee claiming constructive dismissal against their former employer.

However, there are things you can do to avoid this happening in your workplace.

Are All Changes Seen as Constructive Dismissal?

Not all changes made by an employer are deemed to be constructive dismissal. Its only changes are breaches of the employment contract.

The employer's breach must make employment untenable, or have a negative effect on the employee. Such as:

  • A significant reduction in wages, hours, or other fundamental benefits.
  • A loss in employment rights, such as a lack of breaks.

As an employer, you shouldn't feel like you can't make any changes at all - just ensure you're doing so for legitimate business reasons.

How to Avoid Constructive Dismissals

To protect against constructive dismissal claims against you, it's important to do everything you can to treat your employees fairly.

Communicate With Your Employees and Provide Notice Before Changes

If you're thinking about making any changes to someone's employment, no matter how big or small - make sure you have a conversation with them beforehand.

Being transparent with your workforce ensures the following:

  • You can receive an employee's actual consent to any changes you're looking to make.
  • It cements the employment relationship between both parties.

You must also provide sufficient notice before making a substantial change, this allows any tweaks to the change to be made.

Employee Rights to Claim Constructive Dismissal

An employee is entitled to a notice period or pay in lieu thereof when they are terminated. In such circumstances, a constructive dismissal may lead to them losing this right.

If an employee feels they've been mistreated, they may contact an employment lawyer. Employment lawyers may look to claim a constructive dismissal based on the employer's conduct.

It's important you understand the potential damages that can be awarded if one of your employees is looking to claim constructive dismissal.

What Are Employees Entitled to if They've Been Constructively Dismissed?

The first way to claim constructive dismissal involves proving changes were made to an implied or written employment contract forcing the resignation.

A court may find the changes made that led to the dismissal of a fundamental breach of an employment relationship.

If you're found guilty of constructive dismissal you may be required to pay compensation.

Is Constructive Dismissal Different to Wrongful Dismissal?

As an employer, it’s important you understand the differences between constructive dismissal and wrongful dismissal.

Wrongful dismissal often deals with issues that occur following the end of an employment relationship. Constructive dismissal often deals with issues that occur during the working relationship.

Can a Constructive Dismissal Become a Wrongful Dismissal?

It's possible for a dismissal to go from constructive to wrongful in employment law's eyes.

If such a breach of employment contract releases the employee from the contract, leaving the employment relationships to break down - this moves from constructive dismissal to wrongful.

Get Help With Constructive Dismissal Today With BrightHR

You have a duty of care to treat your employees fairly this means not making any negative unilateral changes to the fundamental aspects of their employment.

If you need assistance with constructive dismissal, BrightHR has a handy tool that will make the whole process easier for you.

Our HR document storage tool allows you to store your termination documentation on the cloud for you to make changes whenever required.

Contact us on 18882204924 or book a demo today.

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