Compensation for constructive dismissal

Constructive dismissal is a form of unfair dismissal. It’s a complex area of employment law, but if a claimant is successful, the compensation awards can be substantial.

Claiming constructive dismissal

Constructive dismissal arises where an employee is not actually dismissed but feels forced to leave or resign because of a significant change in their working circumstances. It could also be because they feel their employer has made it impossible for them to carry on working for them.

Constructive dismissal claims can be difficult cases for an employee to win. This is partly because the trigger event must be significant. It’s also due to the need for employees to act quickly.

If an employee continues working for a period after the change in circumstance or trigger event, it can be deemed that they have accepted the change in their working circumstances. This will nullify their ability to make a claim.

How is a constructive dismissal compensation claim calculated?

To make a claim, an employee must have continuously worked for their employer for at least 2 years before leaving. However, there are many exceptions to this rule exceptions. These include where the resignation is because of whistleblowing, discrimination, and breach of contract.

Calculating the award

The compensation for constructive dismissal is made up of two parts: the basic award and the compensatory award. The amount awarded can be difficult to predict; it will depend on the unique circumstances of each case.

Calculating the basic award

The basic award is calculated by multiplying the number of years of continuous service (up to a maximum of 20 years) by the employee’s age and weekly pay (as at date of termination).

This means:

Half a week’s pay for each year of employment, under the age of 22
One week’s pay for each year of employment, between the ages of 22 and 40
One and-a-half weeks’ pay for each year of employment, after the age of 41

For example: in respect of a 35-year-old employee who has worked for her current employer for 5 years, her basic award would be 5 x 1 week’s pay.

What amounts to weekly pay is normally calculated as the normal weekly gross pay, at the time of dismissal, up to the maximum limit. At the time of writing (June 2020) this is £538 and does not include overtime. The maximum permitted basic award payment, as of April 6th 2020, is £16,140.

A tribunal may reduce the basic award if it considers an employee’s conduct before dismissal warrants it.

Calculating the compensatory award

This part of the constructive dismissal compensation award is based on the money an employee has lost because of constructive dismissal, and what the tribunal thinks is just and equitable in all the circumstances.

Various elements need to be considered when assessing the compensatory award. These include:

loss of wages and future wages,
loss of a bonus or commission,
loss of statutory rights and loss of pension.

Wages can also include employee benefits, such as private medical and health insurance.

Whether the employee has managed to get a new job and therefore mitigate their loss, or taken reasonable steps to get a job, will also be considered. Any compensatory award made is also likely to be offset against any payment already received by the employee from the employer.

At the time of publication (June 2020), the maximum awardable amount, in terms of compensation, is £88,519 or 52 weeks’ gross salary, whichever figure is lower.

Confidence in the face of constructive dismissal

If you are an employer, you may be concerned about cost-effective operations, particularly in an economic downturn. Perhaps you are looking to review and make changes to the working conditions of your team? What happens if, in the process, you are accused of constructive dismissal?

If you are an employee, you may be worried about being at risk of dismissal or being forced towards making a claim for compensation due to constructive dismissal. What will be your next step?

Whatever your position, if you need legal advice on compensation and constructive dismissal, our experienced team of employment solicitors is on-hand to assist you. Get in touch with us today.

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