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Compensation and other remedies for constructive dismissal

There are two remedies available for constructive dismissal:

  1. re-employment; and/or
  2. compensation.

1. Re-employment

If you claim unfair constructive dismissal and you want your old job back, you can ask for re-instatement. Or you can ask for re-engagement, which means a different job with the same or an associated employer.

Before a tribunal/court orders reinstatement or re-engagement, it will weigh and balance the following factors:

  • The employee’s wishes: the court/tribunal will not order either remedy unless the employee requests it.
  • Whether it is practicable for the employee to return to work: in some situations it may not be possible for the employee to return to work (e.g., where the employer has relocated).
  • Whether it would be fair to order reinstatement / re-engagement: for instance, in cases where the employee acted unreasonably after resigning, the court could decide it would be unfair to order the employer to re-employ the person.

Note that neither re-instatement nor re-engagement are available as remedies for wrongful constructive dismissal.

2. Compensation

Although an employee may claim both unfair and wrongful constructive dismissal, a court/tribunal will only award damages for one or the other to avoid double compensation.

a. Damages for wrongful constructive dismissal

If you make a claim for wrongful constructive dismissal, you can claim in either the civil courts or an employment tribunal. Note, however, that an employment tribunal cannot award more than £25,000 in damages. There is no such restriction in the civil courts. (NB. Moreover, with an employment tribunal you must comply with a strict three-month time-limit to file a claim. In the civil courts, you have much longer – six years.)

Damages for wrongful constructive dismissal are subject to the same rules as other breaches of contract:

  • Remoteness: You cannot recover damages that do not arise naturally from the breach. So, say for instance you become so distraught after your employer’s unilateral decision to cut your pay that you leap from your chair and inadvertently shatter an expensive vase. It would be a stretch for you to argue that the shattered vase was a natural consequence of your employer’s breach.
  • Compensation: You may claim damages to compensate you for losses resulting from a breach of contract, but not to punish your employer. The aim of damages should be to put you, so far as money can, in the same position as if the contract had been performed. This means you can claim loss of wages and other benefits, such as holiday pay, commission, bonuses, health insurance, a company cars, pensions, etc. You may also claim interest. Note, however, that damages may be reduced if you fail to mitigate your loss (e.g., look for another job). Compensation is also subject to deductions for income tax, National Insurance, and social security benefits you received. Lastly, any money awarded for wrongful dismissal will usually be cancelled out by the amount received for unfair dismissal, and vice versa, to stop you receiving double compensation.

b. Damages for unfair constructive dismissal

Unlike wrongful constructive dismissal, you cannot file a claim for unfair constructive dismissal in the civil courts. You must go before an employment tribunal.

Damages for unfair constructive dismissal consist of two elements:

  1. the basic award; and
  2. the compensatory award.

The basic award is calculated in the same way as redundancy pay. How much you receive depends on how long you have been employed, your age, and your weekly pay before tax:

  • for each year of continuous employment between the ages of 16 and 21 you will get half a week's pay;
  • for each year of continuous employment between the ages of 22 and 40 you will get one week's pay;
  • for each year of continuous employment between the ages of 41 and 65 you will receive one and a half weeks' pay.

However, as with redundancy pay, there is an upper limit of £450 (gross) on the amount of weekly pay you can claim and a maximum overall payment of £13,500. In addition, any period of continuous employment over 20 years is disregarded and for every month you are over the age of 64 you lose 1/12 of your pay.

There are a couple of differences between the basic award and redundancy pay, however:

  1. in some circumstances, the basic award is subject to a minimum payment of £5,500 (e.g., if you are dismissed for a reason connected to carrying out your duties as a safety representative, employee representative, trustee of an occupational pension scheme, or trade union activities);
  2. the tribunal can also reduce the basic award to take account of your conduct and receipt of redundancy pay.

Turning to the compensatory award, this allows compensation for past, present, and future loss of net earnings, fringe benefits, overtime and bonuses. It may also include loss of pension rights and other statutory rights, and expenses in looking or relocating for a new job. A premium for delayed payment or other reasons may also be payable. The maximum compensatory award a tribunal can make, however, is limited by statute (as of 1st February 2013, £74,200).

Note also that compensation is subject to deductions such as income tax, National Insurance, and social security benefits received, and may also be reduced because of other factors (e.g., if you fail to look for alternative employment and mitigate your loss or the tribunal finds you contributed towards your own dismissal).

c. Other damages

It is also possible that the court/tribunal will award additional compensation, where for example an act of unlawful discrimination by the employer (e.g., sex discrimination) forced the employee to resign.

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