Constructive dismissal occurs when the employee resigns in response to a breach of an important term of their contract of employment by their employer and the employee is then entitled to treat themselves as having been dismissed. The employer's conduct that leads to the breach of contract is usually called, "repudiatory conduct” as set in section 95 of the Employment Rights Act 1996.
Examples of conduct entitling the employee to resign include not paying the employee their wages, demoting them without any valid reason, violence towards the employee by their colleagues and making the employee work in dangerous conditions. The breach may be one serious incident or a series of incidents with the most recent incident being regarded as the “final straw”. The employee must also show that they have not done anything that could be construed as them having accepted that breach such as not complaining either at all or for a long period of time.
Where the employee’s claim for constructive dismissal is successful, the Employment Tribunal will award the employee compensation for their employment terminating without notice e.g. the employee will receive their wages and any benefits as though they had worked through their notice period. Further, in relation to dismissal, compensation is only available where the employee has worked for their employer continuously for at least 1 year ( 2 years for employees starting new jobs after 6 April 2012) and the Employment Tribunal will have to consider whether the dismissal was fair or unfair and whether the employer acted reasonably. If successful, the employee will receive a basic award, calculated on the basis of the employee’s age, salary and length of service. The current amount is £430 per week for each completed year (½ a week’s pay for employees aged 21 and under and 1½ weeks’ pay for employees aged 41 and over) up to a maximum of 20 years which amounts to £12,900.
In addition, the employee will receive a compensatory award which is intended to compensate the employee for their financial losses as a result of the dismissal. The Employment Tribunal will consider the employee’s loss of earnings from the date of dismissal to the date of the hearing, future loss of earnings if relevant and loss of benefits such as private healthcare and company car. However, if the employee has started a new job which is either better paid or as well paid as their old job then the employee will not receive compensation from the start date of their new job but if their now job is less well paid then the employee will receive the difference in salary between the two jobs. The compensatory award is capped at £72,000.
The employee has 3 months after the termination of their employment to bring a claim for breach of contract to an Employment Tribunal.