“Constructive Dismissal” – What does it mean?

Posted on September 2, 2022

A constructive dismissal happens when a worker voluntarily quits because the employer created intolerable working conditions. Those conditions have to be bad enough that the worker has no reasonable alternative but to resign.

Even though the employee quits, the discharge is treated as a termination. If the termination would have been unlawful, it can lead to a wrongful termination claim.

A constructive dismissal claim is sometimes called a wrongful constructive termination claim.

What qualifies as constructive dismissal?

Constructive dismissal is any time that an employer creates or permits working conditions that are so egregious that an employee feels that he or she has no reasonable alternative but to resign. Even though the worker resigned, it is treated as a termination.

It is also referred to as

• constructive termination or
• a constructive discharge.

Generally, a resignation is a constructive dismissal if a reasonable employee would have had no reasonable alternative but to quit. It does not suffice if the particular employee found the working conditions to be intolerable. Instead, they have to be so bad that other people, were they in the employee’s shoes, would feel coerced into quitting.¹

In California, for example, employees claiming to have been constructively terminated have to show the following two elements:

1. the employer, through its officers, directors, agents, or supervisory employees, intentionally created or knowingly permitted working conditions that were so intolerable that a reasonable person would have had no reasonable alternative but to quit, and
2. the employee did, in fact, resign because of these working conditions.²

To be sufficiently intolerable, the working conditions generally must either be:

• unusually aggravated, or
• a continuous pattern.³

While single, isolated acts of misconduct by the employer are generally insufficient, they can support a constructive dismissal claim if they were a very serious incident.⁴

Some factors that can help determine whether a resignation was actually a constructive dismissal are:

• how long the employee stayed on the job, in spite of the intolerable working environment,
• if the employee notified the employer of the intolerable working conditions,
• whether the employer investigated and tried to remedy the employee’s grievances,
• whether the employee suffered a crime (including a violent crime) at the hands of his or her employer, and
• whether the employer demanded that the employee commit a crime to keep his or her job.⁵

By recognizing that there are constructive dismissals, employment law prevents employers from skirting around wrongful termination laws. It prevents them from indirectly terminating an employee by making their working life miserable until they resign. Even though the worker quit, the law treats it as a termination.⁶

Many, but not all, constructive dismissals are unlawful. They are frequently a form of retaliation, which is a fundamental breach of a worker’s employment rights. In other cases, they can make such unreasonable changes to the employment contract that they amount to a serious breach of contract (express or implied contract). If this happens, it can lead to a wrongful termination claim.

What are examples of constructive dismissal?

Employers can make working conditions intolerable in a huge variety of ways. The following are some examples of constructive termination claims.

For example: A Post Office employee of 35 years is passed over for promotion. He claims that he was not promoted because of his race. 2 of his supervisors then accuse him of intentionally delaying the mail, which is a crime. An investigation finds no misconduct, but the employee is told that the charges will only be dropped if he either quits or relocates to an isolated location at a pay decrease.⁷

For example: A maintenance worker making minimum wage was made to drive his personal truck for work-related errands. When he requested reimbursement for gas and maintenance, he was denied. He was assigned tasks that required extensive driving. Without reimbursement, the worker quit, claiming that he had no other choice with the costs of gas and his low wage.⁸

Not all adverse events in the workplace amount to constructive discharges, though. The following are some examples of situations that did not amount to constructive termination.

For example: A sales coordinator complained of possible illegal activity in the workplace. Several years later, he received subpar performance reviews. Based on these reviews, he quit.⁹

For example: A sales manager received several poor reviews and was demoted. Based on the demotion, he quit and got a new job, then claimed that he was constructively discharged.¹⁰

When can you claim constructive dismissal?

Employees can claim that they have been constructively fired when their employer has given them little option other than to quit. Employees who think they have been constructively dismissed – and that their termination was a wrongful one – have a limited amount of time to raise their legal rights. They have to file a wrongful termination claim before the applicable statute of limitations has expired.

Which statute of limitations applies to a case will depend on why the constructive dismissal amounted to a wrongful dismissal.

For example, in California, the claim has to be filed within 2 years if it is based on a violation of public policy.¹¹ However, it has to be filed within 3 years if it invokes whistleblowing protections under California labor law.¹² These timeframes begin when the employee resigns, not when the intolerable workplace conditions occurred.¹³

Lawsuits not filed within the applicable period of time can be easily dismissed.

What about at-will employees?

At-will employees can be constructively discharged. However, when that discharge amounts to a wrongful termination is more limited than for other workers.

An at-will employee is someone who can quit or be let go for any reason or no reason, so long as it is not unlawful. Most employment relationships are presumed to be at-will, including in California.¹⁴ Generally, employees are not at-will only when the contract of employment says so.

At-will employees can still file wrongful termination claims – including those done through a constructive dismissal – if the termination:

• violated an implied term of good faith and fair dealing,
• violated an implied continued employment contract,
• was contrary to public policy, or
• amounted to fraud or misrepresentation.

The best way to know if you have a case is to get the legal advice of an employment lawyer from a reputable law firm.

What is the average payout for constructive dismissal?

Employees who were wrongfully terminated, including through a constructive dismissal, tend to receive between $5,000 and $80,000 in compensation in a wrongful termination settlement. However, there is no “average” constructive unfair dismissal case. This means that there is no average payout.

The compensation available in a wrongful termination claim includes financial coverage for the following damages:

• wage loss, including front pay and back pay,
• non-wage benefits, like health insurance or commission pay,
• medical expenses, whether for medical conditions that stemmed from the termination or for out-of-pocket expenses that would have been covered by employer-provided healthcare,
• emotional distress from the termination,
• damage to reputation, and
• attorneys’ fees, when available.

Punitive damages may even be available, if the employer’s conduct was especially wrongful.

These forms of compensation can fluctuate widely between cases. Some important factors include:

• the salary and benefits received by the worker,
• the employer’s actions,
• whether the worker mitigated his or her damages by looking for a new job, and
• whether the worker’s reputation was damaged in the course of the termination.

About the Author

Neil Shouse

A former Los Angeles prosecutor, attorney Neil Shouse graduated with honors from UC Berkeley and Harvard Law School (and completed additional graduate studies at MIT). He has been featured on CNN, Good Morning America, Dr Phil, The Today Show and Court TV. Mr Shouse has been recognized by the National Trial Lawyers as one of the Top 100 Criminal and Top 100 Civil Attorneys.