Concepts, challenges of constructive dismissal

Within recent times I find that I have been receiving an increasing number of judgements, cases, disputes and advice requests regarding the concept of constructive dismissal. The first thing I would like readers to note is the difference between an unfair dismissal and constructive dismissal.

An unfair dismissal occurs when an employer terminates an employee’s contract of employment unreasonably, usually without following proper procedure. However, constructive dismissal is said to occur when an employee believes or recognises that the employer has ceased to adhere to and has breached a fundamental term in the contract of employment. The employee is then entitled to consider his/herself as being discharged from further performance of their duties and may formally resign citing that he/she was constructively dismissed. This must, however, be done within a reasonable time-frame.

Even at this stage, there are certain requirements that the established jurisprudence demands. Firstly, although there is no obligation to actually state the term "constructive dismissal" in the letter of resignation, the employee’s reasons for resigning must be clearly communicated to the employer. The reasons expressed in the letter, serves as evidence that the employer no longer wishes to be bound by the terms of the contract of employment, thereby entitling the employee to resign.

Also, it is critical that before resigning, the employee must be able to provide evidence that he/she brought to the employer’s attention the areas of dissatisfaction or concern and provided the employer with an opportunity to take corrective actions.

Another noteworthy difference is that when an unfair dismissal occurs, the burden of proof is equally shared between the employer and the union representing the employee. However, when a constructive dismissal claim is being disputed the burden of proof shifts heavily to the employee/union, who must establish that the employer's conduct breached a fundamental term of the employment contract be it expressed or implied.

Without proper guidance from the HR department or IR consultant and without understanding of industrial relations jurisprudence, managers usually err in handling employee issues, which may have the potential for a constructive dismissal claim, much to the detriment of the company.

You therefore may be wondering what can bring about situations that can result in a claim of constructive dismissal. Instances when an employee may feel that his/her contract is terminated may occur when the employer unilaterally decides or threatens to reduce an employee’s salary without proper consultation. When he/she feels that they have been improperly or unreasonably demoted, when allegations have been made and penalties decided without allowing the employee to respond. When the employee feels that the employer decided to significantly change the nature of their job functions as not agreed to and provided for in the employment contract.

Harassment, bullying and unreasonable disciplinary proceedings can also be classed as good grounds for constructive dismissal. Also, stressful issues improperly addressed, including health and safety breaches in law.

The authoritative tests for constructive dismissal continue to based on the appeal decision in the English common law case of Western Excavating v Sharp [1978] ICR 221[1] and are as follows:

* A repudiatory breach on the part of the employer. This may be an actual or anticipatory breach, but must be sufficiently serious to justify the employee resigning.

* An election by the employee to accept the breach and treat the contract as at an end.

* The employee must resign in response to the breach.

The employee must not delay too long in accepting the breach, as it is always open to an innocent party to waive the breach and treat the contract as continuing (subject to any damages claim that they may have).

The tests established in the Western case are used by our courts in examining constructive dismissal cases before it. In this regard, there exist case law determined by our Industrial Court where it had dismissed the claims for constructive dismissal such as in its determination of TD 397/2015. The court found that “It could not be reasonably argued that the company’s conduct amounted to a repudiatory breach of the contract of employment”. The worker allowed the issue of her employment status and non-payment of NIS payment to go on for 11 years. The court also found that the company did attempt to regularise the status of the worker.

Or in TD 03/2014 where the question arose if the company breached good industrial relations practices when it allowed the worker to resign instead of dismissing her, after a thorough investigation into the worker, who provided false information on her CV three times. The worker thereafter claimed that she was constructively dismissed.

However, the company provided to the worker a good-faith option to resign so that she will be able to get a recommendation for future employment and was offered a prorated gratuity payment, which would have not been available had she been terminated. In this case, the court did not agree with the union’s claim that the company breached the employment contract by not paying the worker full gratuity. Instead the court determined that the worker was guilty of repudiatory conduct and that natural justice was served and therefore dismissed the union’s claims.

It is therefore vital for the HR and other managers to be aware of the issues surrounding constructive dismissal and other IR-related matters, and when possible, seek proper guidance to mitigate opportunities for IR disputes.

Workers too must also be aware of instances where the employer may have breached fundamental terms and conditions of the contract of employment and whether they are prepared to accept such breaches or not. Such a decision is entirely up to the individual employee, particularly where there is no recognised majority union. But employers must be mindful that our Industrial Court frowns on harsh and oppressive conduct that would justify a claim of constructive dismissal. In such cases damages awarded are normally material and substantive.