Dismissal claims remain one of the most complex and costly areas of employment law for businesses. With the Employment Rights Bill 2025 potentially introducing sweeping reforms, employers must be more vigilant than ever. But do you know the key differences between Constructive and Unfair Dismissal?
What is Unfair Dismissal?
Unfair dismissal occurs when an employee is dismissed without a fair reason or without following a fair procedure. Under current law, fair reasons include:
- Conduct – for example, theft, insubordination or persistent lateness.
- Capability or qualifications – poor performance or ill health, amongst other reasons.
- Redundancy – where the role is no longer needed.
- Statutory illegality – such as a driver losing their licence.
- Some other substantial reason (SOSR) – a catch-all for situations not covered above.
Employers must also follow a fair process, typically involving warnings, investigations and the opportunity for the employee to respond and appeal.
What is Constructive Dismissal?
Constructive dismissal is when the contract of employment is fundamentally breached by the employer to the extent whereby it is seen that the employee has been forced to resign. Common examples include:
- Unjustified demotion
- Failure to address bullying or harassment
- Sudden changes to working hours or location
- Non-payment of wages
In these cases, the resignation is treated as a dismissal initiated by the employer.
Key Differences
| Feature | Unfair Dismissal | Constructive Dismissal |
| Who ends the contract? | Employer | Employee |
| Trigger | Employer’s action to dismiss | Employer’s breach of contract |
| Burden of proof | On employer to show fairness | On employee to show breach |
| Common risk | Poor process or unfair reason | Poor treatment or breach of trust |
What you need to watch out for
- Ensure employment contracts are clear and up to date. Terms that are too vague can lead to disputes over what constitutes a breach.
- Toxic environments often lead to constructive dismissal claims. Address grievances promptly and document all the actions you’ve taken.
- For any dismissal, follow a documented and transparent process. ACAS guidelines are always worth considering in situations such as this.
- Many claims stem from poor handling of disciplinary or performance issues. Make sure your managers are up to speed with current thinking and best practice by instituting regular training programmes and schedules.
The Employment Rights Bill 2025: what’s changing?
Perhaps the most significant change is the proposed removal of the qualifying period for unfair dismissal claims. Currently, employees must have two years’ service to bring a claim. Under the new Bill, it is intended that unfair dismissal protections will apply from day one of employment. However, there is currently uncertainty about this, given that the House of Lords has rejected the government’s proposal. Whether it will now return to the Commons is unclear at the time of writing.
This change had been expected to come into effect in 2027, giving employers time to prepare. We will, of course, monitor the current position and ensure that you have access to the very latest guidance on the subject.
Other relevant reforms
Zero-hour contract protections: Employers must ensure fair treatment and avoid exploitative scheduling.
Trade union access and representation: New duties to inform workers of their rights and simplify recognition processes.
Practical steps for employers
- Ensure all employment documentation reflects current legal standards and anticipates upcoming changes.
- Conduct internal reviews of how dismissals are handled, especially during probation.
- Make sure new hires understand expectations and receive early feedback.
