Constructive Dismissal & Compensation + Settlement Agreements

Constructive Dismissal & Settlement Agreements

Constructive dismissal is a complicated subject, but it is a situation that often enables you, as the employee, to negotiate a decent settlement agreement. This article sets out some of the many pitfalls which tend to thwart employees who want to negotiate a fair exit package deal.

You might want to get a rough idea of the value of your case by filling in the Settlement Agreement Calculator.

Top 3 TIPS

  1. Consider raising a grievance
  2. Keep detailed notes and/or recordings
  3. Make sure you time your resignation right

What is constructive dismissal?

Constructive dismissal is a certain type of unfair dismissal, the difference being that in constructive dismissal the employee resigns, or leaves voluntarily, rather than being formally dismissed by their employer. The full name for constructive dismissal is actually constructive unfair dismissal.

It can be very difficult to prove because employment tribunals believe that it is only in extreme circumstances that someone feels forced to leave employment. The classic extreme example is not being paid your wages, or being physically assaulted. There are so many permutations but they all involved having your working life made so difficult that you feel no option but to leave.

Do you have the 2 year qualifying period?

In order to make a claim for constructive unfair dismissal in the employment tribunal, you need to have worked for your employer for at least 2 years. If you have less then 2 years under your belt, unfortunately it means that it is very easy for your employer to dismiss you or constructively dismiss you (even if it feels blatantly unfair) and get away with it.

In some cases there is no requirement for a two year qualifying period.  For example, if the circumstances relate to whistleblowing (if you have revealed malpractice and they have victimised you for that), discrimination (for example sex, disability, race, pregnancy and other types) and breach of contract (whereby your contract has been breached, for example commission structure changed).

How much could I get in constructive dismissal compensation?

How much could you get in compensation for a constructive dismissal claim depends upon the exact circumstances, but compensation for successful constructive dismissal claims is worked out in the same way as compensation for unfair dismissal claims. It is essentially the amount of money you lost because you were out of work after you had to leave your job. There is now a cap of one year’s salary, or £75,000 – whichever is greater. You will need to provide detailed records of your efforts to find a job since leaving your role.

Make sure you have clear evidence for constructive dismissal claims

You need to have clear evidence to make a constructive dismissal claim. Unfortunately only around 5% of claims of constructive dismissal succeed in the employment tribunal. The main reason is that tribunals decide that there is insufficient evidence to show that the employer’s conduct was so bad that leaving was the only option (instead of, for example, submitting a grievance). So, if your employer puts you on a performance improvement plan, for example, this is unlikely to be considered as justification for you to resign – a Tribunal would expect you to stick it out.

Another big killer of constructive dismissal claims is when the employment tribunal deems the employee to have ‘accepted’ the employer’s misconduct. In practice this means that you left it too late to resign, and by so doing you tacitly accepted the mistreatment. So it may be that swift action on your part is required, but at the same time don’t be rash.

As you probably know,  employers often try to ‘manage out’ employees in order to avoid having to pay them off with a settlement agreement. A manager could be told to put an employee on performance review or to discipline them over a trivial matter. It is surprising how even big corporations employ these kinds of underhand tactics in order to avoid their responsibilities towards their employees. The difficulty however, is proving it.

Time your resignation right

Get the timing of your resignation right

Knowing exactly when to resign is difficult. As mentioned above, if you leave it too late to resign then you can be taken to have accepted the conduct of your employer, and then you cannot resign much later and point to the much earlier conduct as the cause of your later resignation. Conversely, if you can resist resigning and stay employed, then you can be a constant thorn in your employer’s side, and they are more likely to pay you more in a settlement agreement just to get you out of their hair. Read more in our article about negotiating settlement agreements.

Next steps

If you want to talk to us about your work situation, including your next steps and whether you deserve a better deal, just get in touch on 020 7717 5259 or click here to request a free no obligation 15 minute consultation.