What is the difference between constructive dismissal and unfair dismissal? And why should employers care?

As leaders and HR practitioners, it is important to understand the difference between constructive dismissal and unfair dismissal, and to also be aware of how to avoid placing the business in a position where it is at risk of such claims.

What is constructive dismissal?

This type of dismissal is when an employee resigns in response to the employer’s conduct, which has made the position untenable. In practical terms this is a resignation, however, in law it could be known as dismissal.

It can be an action or a series of actions, and the behaviour of the employer, that leads to the employee’s resignation; it does not matter if the final act that makes the employee resign is minor. If the action substantiates a pattern of poor conduct by the employer, there is a risk that such action could be classed as constructive dismissal.

Some examples of behaviour and actions that could lead to constructive dismissal are:

  • A forced reduction of salary or threat of reduction
  • Being demoted without good reason or in breach of contract
  • Allegations of poor performance which are unfounded
  • Stress at work not properly addressed
  • Allowing bullying and harassment in the workplace

How can an employer avoid being accused of constructive dismissal?

The art of good employee relations is in communication. Employers need to be confident to have difficult conversations with employees. Employers may need to develop their emotional intelligence and approach employment matters in a planned and structured way.

What skills do employers need to avoid constructive dismissal claims?

Skills required to develop confidence in managing difficult situations and conversations are:

  • high quality questioning skills
  • active listening
  • the ability to give structure feedback
  • the ability to explain the rational relating to any decision

With these skills in place, employers should be equipped to deal with poor performance and restructure conversations, ask key questions associated with employee wellbeing, address matters with employee groups, and more. It is all in the conversation – oh, and don’t forget the process. Process is all about keeping track of documentation so that employers have an audit trail of how they handled the difficult situation. Ultimately, the employer needs to be able to demonstrate that they have behaved reasonably and that there has been no deliberate intention to not abide by the contract of employment.

How to avoid a claim

Employers need to be vigilant. Stay on top of employment contracts, HR policies and terms and conditions; avoid small issues building up; have the conversation.

It is important to investigate complaints when they arise. Use your HR Partner to help you; put fair processes in place; include an equality, diversity and inclusion policy; and make sure you offer training to your managers in the art of good employee practice.

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What is unfair dismissal?

This type of dismissal is when the employer terminates employment outside of one the categories detailed below. Fair termination of employment can be made (subject to the correct process) for the following reasons:

    1. Capability or qualifications
    2. Conduct
    3. Redundancy
    4. Contravening a statute
    5. Failing to make reasonable adjustment for a disability
    6. Forcing employees to work in breach of health and safety rule
    7. Some other substantial reason

To avoid claims of unfair dismissal, employers need to ensure their internal capability or disciplinary processes are followed. Are your processes up to date and fit for purpose? Employers and managers need to understand the difference between an informal and formal conversationthis is key. If employers are not sure at which point informal becomes formal, they should discuss this matter with their HR Partner; they will be able to help business owners and managers alike to understand their responsibilities.

What is fair process?

Following the basic process of investigation, hearing and appeal may be enough to demonstrate fair process. However, the quality of the questioning, listening and understanding within these processes are the real tests of fairness. Also, don’t forget that employers need to ensure that they understand when representation should be offered and what constitutes adequate notice of proceedings. Accurate documentation and, most importantly, an open mind, is essential to avoid unfair dismissal.

Do you and your managers have the skills to manage difficult situations? Is it time to review your policies and train your managers to build that confidence?

If you would like help with building capability within your business and reducing risks, please contact us today and speak to one of our HR experts on 01473 360160.