What is "constructive dismissal"?

Constructive dismissal refers to a situation where an employee resigns as a result of significant changes made to their job conditions that are deemed unfair or intolerable. This can include drastic alterations in job responsibilities, a demotion, a significant reduction in pay, or a hostile work environment. In these cases, the employee feels they have no choice but to leave their position due to the employer's actions, which fundamentally breach the terms of their employment contract.

This concept is important in employment law because the employee, by resigning under circumstances that constitute constructive dismissal, can potentially claim for damages as if they had been wrongfully terminated. It recognizes that not all dismissals are straightforward; sometimes, an employer's conduct can force an employee to take the step of resigning, which can still grant the employee certain legal rights.

In contrast to other options, formal layoff notices relate to the employer's action of temporarily suspending employment without terminating it, while termination without notice refers to a direct firing that usually does not involve the subtleties of conditions leading to an employee's decision to leave. Retirement due to health reasons addresses a completely different matter regarding an employee's personal decision influenced by health rather than an employer's actions affecting job conditions.