What is Constructive Discharge?
Constructive discharge, also known as constructive dismissal, constructive termination, or constructive resignation, is a term within employment law to describe when an employer’s hostile work environment results in an employee resigning. Unlike other modes of employment severance, the employee in this case, terminates their employment due to an unbearable working environment.
Constructive Discharge Examples
- The employee quits because they are being discriminated against in their workplace.
- An employee terminates their employment because they are being harassed at work.
- The employee resigns because they are being mistreated, for example, they receive a reduction in pay that is not related to their performance in the workplace.
- Instead of firing the employee, the employer creates a hostile environment so that the employee can quit.
Typically, a constructive discharge can result in an employee being able to make a wrongful termination, harassment or discharge claim. These are some examples of claims that could lead to an employee obtaining compensation from the employer.
Why Would an Employee Want to Bring a Claim?
Most employees that resign do not receive unemployment benefits, dismissal compensation or severance packages. This is because technically they will be considered to have voluntarily quit. However, if an employee has been constructively discharged, they will not only be able to claim these benefits, but will still be able to sue.
General Elements of a Successful Constructive Discharge Suit
Legally, an employee who is successful in a constructive termination case, converts the status of the termination of employment from voluntary to involuntary. In essence they are now considered to have been fired and can claim benefits. Due to this, a constructive termination lawsuit cannot be brought in isolation, but must be accompanied by a claim that an underlying wrong was committed, such as discrimination. Consequently, a successful constructive termination lawsuit shows that an employee was forced to quit through wrongful or illegal means.
Successful Constructive Discharge Example
- Status prior to claim: Employee quit job
- Status following a successful claim: Employee was forced to quit because the employer created a hostile environment by discriminating against them.
Making a successful claim of constructive termination is not easy as there are a series of elements present that can sometimes be difficult to establish. The following is a breakdown of these key components of a successful claim.
The Hostile Environment Breaches the Law
In a majority of cases, for a workplace to be considered hostile, a law must have been breached. These include laws prohibiting sexual harassment or discrimination based on any protected characteristic. A hostile environment can also be a result of an employer not taking the necessary steps to accommodate a disabled employee, even if it was an act of negligence and unintentional.
If an employer retaliates against a whistleblower by creating a hostile environment this can still be the basis for a claim.
The Claim is Brought Soon After the Employee Resigns
Employees wishing to bring a claim must consider the statute of limitations for bringing a claim. This time period varies depending on the jurisdiction and the nature of the employees work, for example, federal employees in the United States have a small window of 45 days from the relevant date to sue. The time period to bring a claim will be further explained in the jurisdiction section.
It must be noted that often, successful claims result from an employee resigning soon after an instance of mistreatment. However, cases are more likely to be successful where the employee exhausts all internal complaints procedures, such as filing a formal complaint for sexual harassment. This is because an employee has to show that the employer was aware of the hostile environment and failed to make any changes accordingly.
How Do You Prove Constructive Discharge?
The burden of proof is with the employee, this means the employee has to prove a series of facts. The employee will have to show that they were mistreated by the employer; that the employer was aware of this mistreatment; that the employer failed to remedy the hostile nature of the workplace; that they resigned because of this hostile environment; and that the reasonable person in the employees circumstances would also have resigned.
To prove that there was mistreatment, simple evidence that an employer is being cruel is insufficient. As previously mentioned, there needs to be breach of a relevant law, such as anti-discrimination law. This is because the presumption is that employees undertake at-will employment. This means that, generally, employers are not under any duty to provide a stress-free environment or treat staff fairly. They are only obliged and duty bound, not to discriminate against their employees or act in any other unlawful manner. Therefore, to prove constructive termination it is key that unlawful conduct can be exhibited.
It must also be noted that in most circumstances a series of misconducts or a pattern of egregious behaviour is needed to show that the employee was working in a hostile environment. In some circumstances one severe act can be sufficient, this singular act however, is typically a crime such as sexual assault or another form of violence against an employee by an employer. Isolated instances of negative behaviour or a poor performance appraisal cannot generally establish that the employee was working in intolerable conditions.
It is not sufficient to only show that the working environment was hostile, employees have to show that the employer was aware of this environment and did nothing to remedy this. Showing that the employer ought to have known about the conduct is not enough to prove constructive termination. This is the case even if a large group of employees were the cause of the hostile environment, it must be shown that the employer was aware of this hostile work environment and took no action to fix it. Establishing employer knowledge typically requires evidence that the employee filed complaints to the relevant managerial staff, and that no subsequent action was taken to improve conditions. If the employer did not learn about the hostile work environment, the employee will be unsuccessful in a constructive termination lawsuit. It must be noted that even if it seems as though the employer is purposefully ignoring signs of a hostile environment, evidence of filed complaints is still generally required to lead a successful claim. This is because cases like this are hard to prove, and establishing employer knowledge is difficult without substantial evidence.
The employees subjective opinion that their working environment was hostile is insufficient to prove constructive termination. The Court must believe that the reasonable person in the employees position would have found the working conditions intolerable and would have quit as a result. If it cannot be established that the reasonable person, in the employee’s circumstances, would have found that the workplace was a hostile environment, they will be deemed to have voluntarily resigned. As such they would have failed to prove constructive termination.
Law by Jurisdiction
The nature of a claim and the requirements for a successful suit, vary depending on an individual’s legal jurisdiction. This section will look at three key jurisdictions, specifically the United States, United Kingdom and Canada and their laws on constructive termination.
Constructive Discharge was a legal concept that was initially intended to protect Unionised employees, however the courts have since extended it to circumstances concerning non-unionised employees as well. In the United States, constructive discharge is defined as the reasonable decision of an employee to quit due to an unendurable hostile work environment. Their resignation is deemed as involuntary. The hostile work environment typically violates the following legislation:
- The Fair Labor Standards Act of 1938
- Act establishing minimum wage, record keeping, overtime pay, and the standards for youth employment
- Equal Pay Act of 1963
- Prohibits wage discrimination based on sex
- Title VII of the Civil Rights Act of 1964
- Prohibits discrimination based on race, religion, colour, national origin and sex
- Age Discrimination in Employment Act of 1967
- Prohibits employment discrimination against individuals who are 40 years old or older
- Americans with Disabilities Act of 1990
- Prohibits discrimination against individuals with disabilities
- Family and Medical Leave Act of 1993
- This Act gives certain employees the right to take unpaid leave for specific medical and family reasons, all while their job is protected.
- Genetic Information Nondiscrimination Act of 2008
- Prohibits discrimination based on genetic information in relation to employment and health insurance
- Any other State employment law
One of the main bodies that investigates and regulates the enforcements of civil rights and anti-discrimination laws in the workplace is the Equal Employment Opportunity Commission (hereafter EEOC). Generally employees who want to bring legal action against their employer will have to first file a charge with the EEOC. The EEOC will then conduct an investigation, after which they may present the employee with a Notice of a Right to Sue Letter. Employees may also request a Notice of a Right to Sue Letter directly from the EEOC if they do not want to wait for the EEOC investigation to be completed. Once employees obtain this letter, they then have 90 days to file a lawsuit, failure to do so may prevent an employee from bringing legal action.
Statute of Limitations
The Statute of Limitations is the time period where a lawsuit can be filed. For employees wishing to bring a constructive termination lawsuit the time periods are as follows:
- Private Sector Employees: 180 days (300 days if they are filing in a state that has a state agency) from the day they give their notice of resignation, to file a charge with the EEOC.
- Federal Employees: 45 days from the day they give their notice of resignation, to file a charge with the EEOC.
Burden of Proof
The employee has the burden of proof and has to prove that they were constructively discharged. Employees who want to succeed in a claim are also required to demonstrate that the reasonable person in their position would also have resigned.
If an employee is successful in their suit, they may be entitled to the following remedies which are associated with wrongful termination and employment discrimination:
- Back Pay
- Damages to compensate the employee for their loss of earning from time of termination to the time of trial.
- Front Pay
- Damages to compensate the employee for their future loss of earning from the time of trial. This remedy is available where the employee is unable to find employment or their new job pays less than their previous one.
- Lost Benefits
- This is compensation for any benefits the employee lost due to termination.
- Out-of-Pocket Losses
- Compensation for other costs as a result of your termination. This may include costs incurred through searching for work, or medical bills resulting from harassment or assault in the workplace.
- Pain and Suffering
- Compensation for mental and emotional suffering and discomfort, as well as a reduction in quality of life due to termination of employment.
- Injunctive Relief
- This court order can require the employer to reinstate the employee to their former position of employment with same pay and benefits. This court order can also prohibit the employer from acting in a certain way, for example, stripping certain benefits based on race.
- Attorney’s Fees and Costs
- This is reimbursement for any legal fees obtained by bringing this action.
- Punitive Damages
- These damages are typically awarded when the employer has committed particularly egregious conduct. The purpose of them is to punish the employer for their conduct.
Compensation is capped due to Federal Law. This means there is a limit for the award that an employee can receive for compensatory and punitive damages. These damages amount to the sum of out-of-pocket losses, pain and suffering and punitive damages. The limit is based on the employer’s size and are as follows:
- Employers that have 15 to 100 employees: $50,000
- Employers that have 101 to 200 employees: $100,000
- Employers that have 201 to 500 employees: $200,000
- Employers that have over 500 employees: $300,000.
Chances of a Constructive Discharge Claim Being Successful
Only a small percentage of people who have quit employment will meet the requirements to successfully bring a constructive termination lawsuit. Additionally, it is hard to prove a constructive termination case. As such, it is often advised that if possible, employees contact an employment and labour lawyer to discuss their case and gain more insight. Understandably, remaining in a workplace that is hostile can be a difficult choice for an employee, considering that many people working in such environments experience some detriment to their mental and physical wellbeing. However, it is still advised that they contact a lawyer prior to termination of employment to determine their likelihood of making a successful claim and to better understand the consequences of resignation and a failed claim. Even if employees must terminate their employment for safety and wellbeing reasons, it is still recommended that they seek legal counsel as it is possible for them to carry out a series of tasks that could boost their chances of succeeding in a constructive discharge claim before quitting.
For additional and more general constructive discharge examples please click here.
Constructive discharge is more commonly known as Constructive Dismissal, and is defined in the Employment Rights Act 1996 section 95(1)(c) as when “the employee terminates the contract under which he is employed (with or without notice) in circumstances in which he is entitled to terminate it without notice by reason of the employer’s conduct”. This definition is essentially the same as previous definitions that have been given for constructive discharge in this article.
The circumstances where the employee is entitled to terminate their employment without notice, are dictated by common law. A constructive dismissal claim is usually brought based on a breach of the implied term of trust and confidence within all employment contracts. An employer breaches this if they “without reasonable or proper cause, conduct themselves in a manner calculated or likely to destroy or seriously damage the relationship of trust and confidence between the employer and the employee”. A constructive dismissal breach can also arise out of a fundamental breach of any implied or express term of the employment contract.
The UK government issued some examples of conduct that can be deemed serious enough to constitute a constructive dismissal:
- If your employer suddenly demotes you without cause
- If your employer does not pay you
- If your employer forces you to accept unreasonable alterations to the nature of your work
- Example: They tell you to work night shifts when you are only contracted to work day shifts
- If your employer makes you work in unsafe conditions
- They are aware of and allow coworkers to bully and harass you
The government also highlights that this conduct can be a singular serious incident or a collection of incidents that, together, can be serious. It must be noted that if an employee believes they have a case for constructive termination, they must terminate their employment immediately. If they do not, the employer can argue that they have accepted the treatment that they received, and have therefore accepted any breach their employer has made.
Common Law v Statutory Dismissal
There are two types of Constructive Dismissal, common law and statutory constructive dismissal.
Common law constructive dismissal is the case where an employer knowingly or unknowingly terminates an employment contract by committing a repudiatory breach and the employee accepts this breach. This essentially means that the employer substantially breaches an express term of the employment contract by their conduct, and the employee accepts this by no longer acting bound by the terms of that contract.
Statutory constructive dismissal is defined by the Employment Rights Act 1996 section 95(1)(c) as previously mentioned.
Both statutory and common law constructive dismissal both amount to the same consequence.
Constructive Dismissal, Unfair Dismissal and Wrongful Dismissal
Following a constructive dismissal, an employee can also file for unfair dismissal or wrongful dismissal. However, both of these claims are different from constructive dismissal.
Unlike a constructive dismissal, an unfair dismissal is where an employee is fired in an unlawful manner. For example, where an employee is fired because they are pregnant. The reason a claim can be brought for both a constructive dismissal and unfair dismissal is because it is hard for employers to establish that a constructive dismissal was lawful and fair. Employees must take note that they are only eligible to bring an unfair dismissal claim if they have been an employee for a continuous period of at least 2 years.
Wrongful dismissal occurs where an employer breaches the terms of a contract while terminating employment. For example, if an employer dismisses an employee without the proper notice period.
The grounds for constructive dismissal are all follows:
- Changes to the contract made solely by the employer,
- intentional cuts in status or pay, this is the case even if these changes are temporary (Wadham Stringer Commercials (London) Ltd and Wadham Stringer Vehicles Ltd v Brown )
- the employer persistently delaying wages
- withdrawing the use of a car
- significant changes to employee’s duties, hours or location (unreasonable daily travelling distance)
- prohibiting holiday leave (Lytlarch Ltd v Reid  ICR 216)
- suspension without or with full pay
- Breaching the contract through conduct that can be deemed as bullying,
- persistent and unwanted amatory advances
- employer ignores employees complaints
- swearing and or bullying
- employer singles out employee by not giving them a pay rise
- any verbal abuse that for example, refers to gender, incompetence or size
- employer criticises employee in from of their subordinates
- employer does not notify a woman on maternity leave of a vacancy that she would have applied for had she been present or notified of the position
- employee experiences a lack of support, for example, they are forced to do the work of two people
- employer reveals concealed complaints in a reference, this is the case even is a reference is required by a regulator
- Other breaches such as:
- giving an employee disproportionate disciplinary penalties
- exhibiting behaviour that it outside the boundaries of good industrial practice, or behaviour that in unjust, unbearable, erratic or random
- exhibiting any form of behaviour that undermines trust and confidence
- employee is tricked into resigning by employer (Caledonian Mining Co Ltd v Bassett  ICR 425)
- employer refuses the transfer of an employee to an alternative post on the basis of workplace stress
It must be noted that employees do not have an automatic right to pay rise, further a smoking ban does not constitute a reasonable ground for constructive dismissal. Additionally, the person that causes the dismissal is not required to have authority to dismiss an employee, the only requirement is that they must be acting in the course of their employment.
Statute of Limitations
An employee has 3 months from the date of termination of employment to lodge a claim with the Employment Tribunal.
The Importance of Timing
As has been previously mentioned the employee must resign soon after the employer’s misconduct. If they do not resign immediately after a singular act, they will be deemed to have accepted the employer’s conduct and waived their right to bring a claim. This is the case unless the employee resigns after the last straw.
The last straw is seen as an act that can revive all the employer’s previous misdeeds for the purpose of the law. The purpose of this is that all of the employer’s misconducts will be seen as a string of events that, together, can be deemed as a fundamental breach and therefore the cause of the employee’s constructive dismissal. The last straw does not have to be similar to past misconducts, it must however, be connected to the obligation of trust and confidence.
An employer may state that the employee accepted a breach because they did not resign, however, if an employee can show that no consideration was paid, they can state that they did not accept the breach. This is the case even if the employee continued working for the employer for a year. However, if the employee accepts a new job within this time, they will be taken to have accepted the employer’s breach. As such, it is advised that if the employee wishes to look for new work, they should either work under protest, or better yet, serve their notice of resignation prior to conducting a job search. It must also be noted that if an employee accepts new work prior to giving notice, an employer can argue that termination of employment was because the employee found a new job.
Burden of Proof
The burden of proof lies with the employee, so they must prove that they were constructively dismissed. To be successful in a claim the employee must also demonstrate that the reasonable person in the employees position would also have resigned.
A constructive dismissal claim is a contractual claim, and can be brought to the Employment Tribunal or a Court. As a contractual claim, there is no cap on compensation.
If an employee’s claim is successful in the Employment Tribunal they are awarded a combination of a basic and compensatory award.
The basic award is a statutory award that is calculated by considering an employee’s length of continuous service, their weekly pay at the time of contract termination, and their age. A tribunal holds the right to reduce the basic award on the basis of an employees conduct prior to termination.
The compensatory award is often a much larger sum than the basic award. Section 123(1) of the Employment Rights Act 1996 states that this award shall be a sum that the Tribunal believes to be just and fair taking into account the loss suffered by the employee. Further, the loss needs to be a result of the employees resignation and the employer’s actions.
There are four main losses that can be claimed under the compensatory award:
- Loss of wages
- This includes contractual benefits such as health insurance or a company car
- Loss of pension
- Loss of future wages
- Loss of statutory rights
- For example being forced to quit prior to 2 years which would result in an employee being unable to bring an unfair dismissal claim
In Canada, constructive discharge is more commonly known and constructive dismissal, disguised dismissal or quitting in cause. Constructive dismissal in Canada is covered by Part III of the Canada Labour Code and is defined as where an employee is forced to quit because an employer substantially fails to abide by the contract of employment; changes the terms of the employment contract on their own; or shows conviction to carry out these two aforementioned acts. It is essentially an employer’s failure to meet their contractual obligations. It was also determined in the case of Srougi v. Lufthansa German Airlines,  F.C.J. Nº 539 that where an employee is determined to be constructively discharged, they have certainly been unjustly dismissed. This means that the remedies for unjust dismissal also apply to cases of constructive dismissal.
The employer’s actions must be without the employee’s consent. Like in the UK, if the conduct of the employer is deemed to be accepted or with the consent of the employee, it will not be a case of constructive dismissal, but simply a change in the contract terms. The employee must show non-acceptance, as such, they must resign after a reasonable and short period after the employer’s deviation from the agreed contract. In some cases, if the employee continues to work for the employer, the court will still decide that the employee did not accept the employer’s conduct. Such circumstances include:
- Where the employee continues to work but under protest
- Where the employee continues to work for the employer while filing a lawsuit
If the employee attempts to negotiate with the employer while remaining under their employ, the court will determine that they have accepted the employer’s changes to the employment contract.
Situations that can Result in Constructive Dismissal
The following is a list of circumstances that can result in a constructive dismissal:
- Changes in Duties and Powers
- This is the most common ground for a constructive dismissal claim. This is where the employee quits because of a substantial change to the nature of the duties.
- This usually involves a significant decrease in status.
- For example, a supply chain director whose duties are now confined to those of a singular factory manager.
- This is the case even if the job title and salary of the employee remains unchanged.
- Suspensions and Threats
- In some cases the courts have decided that there has been constructive dismissal where an employee resigns due to threats of demotion or dismissal.
- A constructive dismissal can also be based on an unfair suspension or salary reduction.
- It must be noted that encouragement from an employer to resign will not constitute as sufficient grounds for a constructive dismissal claim.
- Reduction in Salary, Hours, Benefits or Status
- This case involves the employee quitting due to significant changes to the nature of their work, such as working hours or location.
- An employee would not be deemed to have been constructively dismissed if they were relocated for work, and they were aware of the potential relocation as a part of their employment.
- If an employer changes an employee’s status, in some cases that can constitute a constructive discharge.
- For example, where changing the status of a salesperson to an independent contractor and therefore, from an employee to an independent contractor.
- If a company car that is a necessary working tool for an employee and an employer withdraws that vehicle, this may also be deemed as constructive dismissal if the employer does not have a good reason for doing so.
Constructive dismissal also applies where an employee quits employment because the workplace is deemed to be so toxic that a reasonable person would not be expected to return to work. A toxic environment is often described as one where criticism is unjustified; accusations of poor performance are unfounded; or where the employee experiences harassment that the employer fails to prevent.
Statute of Limitations
Section 240(2) of the Canada Labour Code, states that a complaint must be filed 90 days following the employer’s misconduct. This is unless the requirement for an extension under section 240(3) apply.
Burden of Proof
Like in the US and the UK, the burden of proof lies with the employee and the employee must demonstrate that the reasonable person in the employees position would also have resigned.
A constructive dismissal claim that is successful can possibly afford an employee the following remedies from the employer:
- the employee can be reinstated with or without compensation for wages lost
- this means the employee can get their job back with or without compensation for lost salary
- compensation for wages lost without the employee being reinstated
- this means the employee only gets compensation for lost salary
- anything that is deemed fair to remedy the effects of the dismissal; such as legal costs or the dismissal being cleared from the employees employment record.