When a resignation becomes a dismissal

It seems an unusual concept, that an employee can resign and then win an unfair dismissal claim against their employer, but that is exactly what happens in situations where the resignation is deemed to be a ‘constructive dismissal.’ Our article looks at the concept and how to avoid inadvertently ‘dismissing’ employees.

When can an employee dismiss themselves…and win a tribunal case against their employer?

It seems an unusual concept, that an employee can resign and then win an unfair dismissal claim against their employer, but that is exactly what happens in situations where the resignation is deemed to be a ‘constructive dismissal.’ Our article looks at the concept and how to avoid inadvertently ‘dismissing’ employees.

To understand constructive dismissal we need to understand a little bit about contract law. An employment contract is a legal agreement between employer and employee and if either party breaches any part of that agreement, a claim could be made by the other. Employment contracts contain express (written) terms and implied (non written) terms and even in the absence of a written contract (in itself a breach of law) the implied terms still exist…and therefore a contract exists, albeit not one that’s written down.

Both employer and employee are capable of breaching the contract. If the breach is serious enough the contract may be ended as a result. If an employee commits a very serious breach (for example theft which is classed as gross misconduct) the contract will be deemed to be at an immediate end and the employer will normally effect a dismissal without notice. In the case of persistent minor breaches, the employer may well escalate warnings to the point of a dismissal, but in this case absent of gross misconduct, any dismissal will be with notice.

If, on the other hand the employer commits a serious breach or a persistent escalation of less serious ones, the employee may be entitled to regard the employment contract as terminated and their action in these circumstances is to resign (with or without notice) and to lodge a tribunal claim that theirresignation is due to the employer having effectively terminated their employment contract by breaching it (and hence effectively they were dismissed.)

So we can see that either the employee or the employer can make a decision on whether or not persistent minor breaches or a single major contractual breach is capable of amounting to a dismissal. Where the employee makes this decision his recourse, normally, is to then file an action for unfair dismissal, and if the tribunal agrees that the employee’s rights have been breached then compensation may be awarded in the normal way.

Employers most at risk of constructive dismissal claims are unsurprisingly those who allow breaches to occur….so practically what is a ‘breach’ that is capable of ending an employment contract?

In Mostyn Vs S&P Casuals, Mr Mostyn successfully won his constructive dismissal claim when his employer enforced a pay cut from £45,000 to £25,000 to more accurately reflect Mr Mostyn’s sales performance.  A unilaterally imposed pay cut is likely to result in a successful claim then, but other less obvious changes that result in a reduction of earnings could also do the same. Reductions in overtime rates, changes to commission schemes, bonuses, hours etc. could all have the effect of reducing income and could result in a constructive dismissal. It’s always essential to consult with employees rather than simply impose changes that negatively impact pay. In Mr Mostyn’s case myHRdept would have recommended a performance management process prior to any pay cut (which might have been proposed at the point of dismissal and as an alternative to it.)

Football fans may remember Carneiro Vs Mourinho and Chelsea FC, a very different type of constructive dismissal. In that case Mourinho behaved (allegedly) appallingly towards Dr Carneiro during and after a game, and she felt his behaviour amounted to sex discrimination and was judged by her to be so serious as to warrant the termination of her contract. The case settled a few days before what was destined to be an epic tribunal episode, and one that Mourinho was clearly keen to avoid. What this case shows is that poor behaviour by managers can itself give rise to constructive dismissal claims and business owners and directors should ensure that adequate training is given and concerns are thoroughly investigated.

Finally in Insley Vs Accent Catering, Insley, who resigned in advance of a disciplinary hearing for smoking an e-cigarette in view of pupils in the playground of her school, lost her constructive dismissal claim. The tribunal was satisfied that the employer had sufficient grounds to require her to attend a disciplinary hearing and in doing so Ms Insley had no justification for regarding herself as having been dismissed in advance of that hearing. This case could have been different if Ms Insley’s offence had been more minor and the employee had over-reacted by summoning her to a hearing for gross misconduct, or by suspending her without having good grounds to do so. An employer’s response to misconduct should always be measured and genuinely reflective of the actual misconduct and its implications.

While the Insley case is a reminder to employees that constructive dismissal cases are not always easy to win, the other two cases are good examples of where employers can come unstuck. Employers should always seek advice (e.g. from myHRdept) prior to imposing contractual change or other changes that might impact on pay or conditions; and all employers should ensure they have a Dignity at Work procedure and take reasonable steps to ensure it is understood and is being adhered to.

If you’re thinking of outsourcing your HR or employment law needs, why not contact myHRdept? Call us on 01628 820515 to discuss your requirements or contact us and we’ll call you back.

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