Constructive Dismissal: What Employers Need to Know
Constructive dismissal happens when an employee resigns because their employer has seriously breached their contract, usually the implied term of trust and confidence. If a tribunal agrees, the resignation counts as a dismissal. Ordinary unfair dismissal claims need two years' service today, six months from 1 January 2027, but discrimination claims need none.
This post explains what constructive dismissal means, what employers should do if an employee resigns and alleges it, and how to reduce the risk.
What constructive dismissal means
The law treats a resignation as a dismissal where the employee leaves in response to a fundamental breach of the contract by the employer. The employee does not need to have been formally dismissed. They need to show that:
The employer committed a serious breach of contract
They resigned in response to that breach
They did not delay too long before resigning, which could suggest they accepted the situation
A breach can be express, such as not paying wages or changing pay, hours or location without agreement. More often it is a breach of the implied term of trust and confidence, meaning conduct that, without good reason, seriously damages the relationship.
It is not enough that the employee is unhappy, or that the employer's conduct was merely unreasonable. The test is demanding, but employees do succeed.
Examples of conduct that can lead to a claim
Failing to pay wages or making unauthorised deductions
Imposing a significant change to pay, hours, duties or place of work without agreement
Bullying, harassment or humiliating an employee, or allowing it to continue
Failing to deal properly with a grievance
Making false or unsupported allegations of misconduct
Demoting an employee without a fair reason
Ignoring serious health and safety concerns
A serious breach of confidence or trust by a manager
Often there is a final incident, sometimes called the last straw, that triggers the resignation after a series of earlier problems.
What to do if an employee resigns and says it is constructive dismissal
How you respond in the first few days matters.
Do not ignore it, and do not react angrily. Acknowledge the resignation in writing, in a calm and neutral tone.
Ask them to set out their concerns, and offer to meet. If they have not already raised a grievance, invite them to do so, and deal with it properly even though they have resigned.
Check whether they want to withdraw it. Employees sometimes resign in the heat of the moment. Do not push them, but offer a conversation.
Investigate the complaints. Look at what they say happened, with an open mind.
Preserve documents and notes. Do not delete anything.
Do not retaliate, for example by withholding a reference, pay or holiday pay they are due.
Take advice early. This is the time to speak to an HR adviser or employment solicitor.
How a tribunal approaches a claim
First the tribunal decides whether there was a dismissal at all, applying the three tests above. If so, it then considers whether the dismissal was fair. The employer must show a potentially fair reason and that it acted reasonably. In practice, where the tribunal finds a fundamental breach, it is hard to show the dismissal was fair.
For unfair dismissal, the employee normally needs two years' service, or six months for dismissals on or after 1 January 2027. The compensation cap is also removed from that date. Discrimination and some other claims need no qualifying service. For events on or after 1 October 2026, the time limit for most claims is six months, counted from the date of resignation, and it is paused during Acas early conciliation.
How to reduce the risk
Handle grievances properly and promptly. An ignored or badly handled grievance is among the most common triggers.
Follow the contract. Do not change pay, hours or place of work without agreement, or consult and follow the proper process if change is genuinely needed.
Manage conduct and performance fairly, with evidence and a fair procedure.
Address bullying and conflict early, and do not wait for it to escalate.
Keep good records of decisions, conversations and the reasons.
Communicate. Employees who understand why something is happening are less likely to feel forced out.