News

June 2009

Constructive Dismissal

To establish a case of constructive dismissal the employee must show that his employer committed a fundamental breach of a term of the employee’s contract of employment. The breach must be sufficiently serious, for instance, the employer refusing to pay the employee, or forcing that employee to accept fundamental changes to the terms of his employment contract, e.g. requiring that he relocates. Alternatively, the breach could be the last in a series of incidents which justifies the employee leaving. In this scenario, it will not matter that each of the separate incidents may not themselves amount to significant breaches of contract. What will matter is that when they are taken together, they must cumulatively amount to a fundamental breach of contract.

Once the breach has been committed, if the employee accepts the breach and chooses to leave the company as a result, this could amount to a constructive dismissal. However, employees would be advised to first raise a formal grievance through the appropriate channels, as failure to do so could have serious consequences on any claim the employee might have.

If an employee does wish to accept the breach and leave, he should do so within a reasonable time, this is so that the employee cannot be said to be affirming the contract, or waiving the breach. From the employee’s perspective, the fact that he must resign may prove impractical, as he may then be forced to fund his employment claim with little or no income. The employee will also have a duty to mitigate his loss by looking for a new job.

Post-departure, the contract will be treated as terminated. For this reason, employees who can successfully make a case that there has been a constructive dismissal may have a claim for wrongful dismissal and possibly also unfair dismissal, depending on the circumstances. From an employer’s perspective, the fact that the contract is treated as terminated can mean that the terms of the contract are no longer enforceable, and importantly, it may not be able to rely on post-termination restrictions, such as the ability to ensure that senior members of staff do not compete with the business for a period of time post-termination.

Overview of Constructive Dismissal

The relevant points to consider when considering if there has been a constructive dismissal were set out in the 2002 case of Cape Industrial Services v Ambler (EAT/0950/01 DA):

. What are the relevant term(s) of the contract said to have been breached?
. Are the breaches alleged, or any of them, made out?
. If so, are those breaches or is that breach fundamental?
. If so, did the Applicant resign in response to such breach or breaches;
. If so, then he was constructively dismissed.
. In that event, has the Respondent shown a potentially fair reason for the constructive dismissal; if not, the dismissal is unfair; if so, did the Respondent act reasonably or unreasonably in treating that reason as a sufficient reason for dismissal?

Please note that this information is provided for general knowledge only and therefore specific advice should be sought for individual cases.

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