Constructive unfair dismissal from 1 January 2027: new year, new employee rights

Trainee Solicitor Naomi Nash explains the basis of a constructive dismissal claim and the imminent changes in the law due to the phased implementation of the Employment Rights Act 2025.

The New Year often brings with it many new things: resolutions, fresh starts, new opportunities, and renewed motivation. The employment law landscape will be no different this coming January. From the start of 2027, a range of new employment rights and legislative developments are set to come into force, bringing significant changes for both employers and employees, particularly in relation to constructive dismissal claims.

Before exploring the changes ahead, let us briefly recap the fundamentals of constructive unfair dismissal.

What is constructive unfair dismissal?

Despite its name, constructive unfair dismissal does not involve an employer actually dismissing an employee. Instead, it occurs when an employer’s behaviour becomes so unreasonable that the employee feels they have little choice but to resign and treat themselves as dismissed. The trigger is usually a serious breach of contract, whether of an express term or an implied obligation such as maintaining trust and confidence. While this can be the result of one major incident, it is often a series of smaller actions that, taken together, undermine the employment relationship. This is known as the ‘last straw doctrine’. When the employer’s conduct crosses that threshold, the employee may be entitled to resign and claim constructive unfair dismissal.

Examples of constructive unfair dismissal

1) Changes to employment terms

• Reducing pay, benefits or hours without the employee’s agreement.
• Changing other key contractual terms where there is no contractual right to do so.

2) Unreasonable changes to working arrangements

• Requiring an employee to work from a substantially different location without their consent.
• Even in instances where an employment contract includes a clause allowing the employer to require an employee to change their usual place of work, either temporarily or permanently (known as a “mobility clause”), the employer must exercise that right reasonably and fairly.

3) Failure to provide a safe and respectful workplace

• Bullying, harassment or discriminatory treatment.
• Allowing inappropriate behaviour to continue without intervention.

4) Ignoring employee concerns

• Refusing to investigate or address a grievance without good reason.
• Immediately dismissing legitimate complaints.

5) Conduct that undermines trust and confidence

• Excluding an employee from meetings or key communications.
• Withholding work or responsibilities.
• Removing significant duties, effectively demoting the employee.
• Any other conduct that seriously damages the employment relationship.

Can the employee delay resigning?

Not necessarily. An employee can remain in their role while making it clear that they reject their employer’s treatment and are working under protest. Although they should avoid an excessive delay, the law recognises that employees may need time to consider their position. In some circumstances, particularly during a period of sickness absence, waiting several weeks before resigning may not affect their right to bring a claim.

Does the employee have to raise a grievance before resigning?

No, although the effect of the Advisory, Conciliation and Arbitration Service (Acas) Code of Conduct on disciplinary and grievances (‘Code’) may affect the level of compensation, the employee can claim if they do not raise a grievance, even after they have left their job. Under the Code, compensation can be reduced by up to 25% for failure to raise a grievance.

Can the employer make amends or ‘cure’ the breach?

No, if an irretrievable breach of contract has taken place, an employer cannot fix, reverse or undo the breach once it has taken place. The employee retains the right to resign and claim constructive unfair dismissal, regardless of the employer’s subsequent efforts to make amends.

What are the upcoming changes?

Set out below are the key changes to the law on constructive unfair dismissal claims, including one change that is effective from 1 October 2026 and further changes effective from 1 January 2027.

Who has the right to bring a claim under the current law

An individual has the right to make a constructive dismissal claim to an employment tribunal if they have:

1. the legal status of employee; and
2. worked for their employer for 2 years or more.

In certain circumstances an individual may be able to make a claim with less than 2 years’ service if the reason for resigning relates to:

1. pregnancy, childbirth or maternity leave
2. health and safety
3. whistleblowing
4. asserting their rights under the Working Time Regulations
5. asserting their right to the National Minimum Wage

Legal changes

Employees will be able to bring a claim for constructive unfair dismissal with just six months’ service, not two years. Employees who started on or after 1 July 2026 will benefit from this right, meaning a new starter could resign and bring a claim from 1 January 2027 onwards.

Time limit to bring a claim under the current law

To make a claim to the Employment Tribunal, an employee has 3 months minus 1 day from either:

1. the last day of their notice period; or
2. the day they resigned, if they did not give their employer notice.

Legal changes

The Employment Tribunal limitation period increases to 6 months minus one day (this change takes effect from 1 October 2026 and therefore applies in January 2027).

Limitations on changing terms and conditions of an employment contract under the current law

Employers may be able to dismiss and re-engage employees on revised contractual terms where there is a genuine business need and a fair, meaningful consultation process has been followed.

Legal changes

Employees cannot be dismissed for refusing a restricted contract variation. Restricted contract variations are:

1. A decrease in, or complete withdrawal of, contractual salary or other contractual payments.
2. Changes to payment methods where earnings are linked to work performed, such as commission-based or productivity-related pay arrangements.
3. Amendments to pension provisions or the benefits available under a pension scheme.
4. Alterations to an employee’s contracted working hours.
5. A reduction in contractual annual leave entitlement or other paid time off work.
6. Specified changes to shift patterns and duration.
7. The introduction of a contractual provision that permits the employer to make such changes without obtaining the employee’s consent.

If an employee is dismissed for refusing to comply, the dismissal will be automatically unfair. The only exception to this is where the employer can demonstrate that the business is facing severe financial difficulties which threaten its survival, and that no viable alternative is available.

Compensation for a successful constructive unfair dismissal claim under the current law

A successful claimant may receive a basic award plus a compensatory award. The compensatory award is currently capped. For 2026/2027, the cap is £123,543 or 52 weeks’ pay, whichever is lower.

Legal changes

The basic award remains available. However, the statutory cap on the compensatory award is removed. Compensation will still be assessed by reference to actual and future losses proved by the employee, but the previous statutory cap will no longer apply.

How we can help employers and employees

Employers

If an employee raises concerns about their treatment at work, we can help you navigate the situation appropriately and with confidence. We provide practical, strategic advice to help you address concerns, cultivate positive workplace relations, and reduce the risk of constructive unfair dismissal claims and other employment disputes.

If an employee has already brought a constructive unfair dismissal claim, we can provide expert representation and support throughout the process.

Employees

If you feel you are being treated unfairly at work and are considering resigning as a result, we can provide clear advice and support. Whether you are still employed and exploring your options or have already resigned, we can help you understand your rights, assess your position, and guide you through the next steps.

For further information, please contact Naomi Nash, Trainee Solicitor in the employment team, by emailing nan@furleypage.co.uk. Furley Page has offices in Canterbury, Whitstable and Chatham.