exitagreementConstructive dismissal and settlement agreements
Resigning is what creates a constructive dismissal claim — and it is also the moment you stop holding anything back. The negotiation is almost always stronger before you go than after.
Key points
- Constructive dismissal is defined in one phrase of s.95(1)(c): you terminate the contract in circumstances entitling you to do so without notice, because of the employer’s conduct.
- Being dismissed is stage one of two. Section 98 then lets the employer show the dismissal was fair.
- If you are already on notice, leaving early does not convert the dismissal into a resignation — s.95(2).
- The clock is three months from the effective date of termination, and the extension test is narrow.
- The tribunal statistics do not break constructive dismissal out separately. Anyone quoting a figure for it is estimating.
What the statute actually says
The whole definition is one limb of one subsection, and it is worth reading rather than paraphrasing, because every word in it is doing work.
For the purposes of this Part an employee is dismissed by his employer if (and … only if) … the employee terminates the contract under which he is employed (with or without notice) in circumstances in which he is entitled to terminate it without notice by reason of the employer’s conduct.Read the section on legislation.gov.uk
Three things have to be true, and the statute names all three
- The employer’s conduct. Something they did or failed to do.
- Conduct entitling you to terminate without notice. Not conduct that was unfair, or unpleasant, or badly handled — conduct serious enough to release you from the contract immediately.
- You terminate the contract. With or without notice, but you have to go.
What this page will not tell you
How serious is serious enough. That question is answered by case law rather than by statute, and case law is not published on legislation.gov.uk. This site quotes primary sources and does not summarise judgments from memory, so the honest answer is that the threshold is high, it is fact-specific, and it is the single thing most worth putting in front of someone who can read your documents. Why we draw that line.
What we can say from the statute alone is that the bar is set by the words entitled to terminate it without notice — the same standard that would let you walk out of any contract on the spot. That is a demanding phrase, and it explains why so many strongly felt grievances do not become constructive dismissal claims.
Being dismissed is not the same as winning
Establish s.95(1)(c) and you have shown you were dismissed. You have not yet shown the dismissal was unfair. Those are two separate stages and the second one has its own statute.
In determining … whether the dismissal of an employee is fair or unfair, it is for the employer to show— (a) the reason (or, if more than one, the principal reason) for the dismissal, and (b) that it is either a reason falling within subsection (2) or some other substantial reason of a kind such as to justify the dismissal … A reason falls within this subsection if it— (a) relates to the capability or qualifications of the employee … (b) relates to the conduct of the employee … (c) is that the employee was redundant, or (d) is that the employee could not continue to work in the position which he held without contravention … of a duty or restriction imposed by or under an enactment.Read the section on legislation.gov.uk
The burden moves to the employer, then moves back
Note the structure. It is for the employer to show the reason and that it falls within one of the listed categories or is some other substantial reason. If they cannot, the dismissal is unfair. If they can, the tribunal then asks whether they acted reasonably in treating that reason as sufficient.
So a constructive dismissal claim can be lost at either stage, and the two failure modes look completely different from the inside. That is a large part of why these claims settle.
The rule for people already on notice
A common and expensive worry: I have been given notice and I cannot face working it. If I leave early, have I resigned?
An employee shall be taken to be dismissed by his employer for the purposes of this Part if— (a) the employer gives notice to the employee to terminate his contract of employment, and (b) at a time within the period of that notice the employee gives notice to the employer to terminate the contract of employment on a date earlier than the date on which the employer’s notice is due to expire; and the reason for the dismissal is to be taken to be the reason for which the employer’s notice is given.Read the section on legislation.gov.uk
What that means in practice
If the employer has given you notice and, within that notice period, you give shorter notice, you are still treated as dismissed — and the reason is taken to be the employer’s reason, not yours. Leaving early in that specific situation does not hand them a resignation.
It is worth being precise about the scope: this applies where the employer has already given notice. It is not a general licence to resign and call it a dismissal.
Why the negotiation is stronger before you resign
This is the practical heart of the page, and it runs against most people’s instinct.
You are holding something you have not spent
Before you resign, the employer faces an employee with a live grievance who might leave and claim. After you resign, they face a former employee who has already done the irreversible part. The second position is weaker, not stronger, and it is weaker precisely because the decision has been made.
The protected conversation may not protect them
There is a second asymmetry worth knowing. If your employer opens a settlement conversation relying on ERA 1996 s.111A, that protection only covers proceedings on a complaint under s.111 — ordinary unfair dismissal. Where discrimination or whistleblowing is also in the picture, they are back to the ordinary without-prejudice rule, which needs a genuine existing dispute. More on s.111A and the subsection that removes the protection where behaviour was improper.
And the queue is on your side of the table
Every offer is priced against what refusing would cost. In April to June 2026 the tribunal received 5,822 unfair dismissal complaints — the largest single category — disposed of 2,782, and ended the quarter with 22,336 still open.
HMCTS management information for April to June 2026, covering cases on the Reform case management system and single claims only. It is not official statistics and the figures are provisional. Constructive dismissal is counted within the unfair dismissal jurisdiction and is not reported separately. Source: Tribunals statistics quarterly: April to June 2026, published 10 September 2026.
Thinking about resigning?
Take advice before you do, not after. Send your postcode and the situation in a sentence — firms advertising for your area can usually tell you within a call.
The clock, and why there may be two of them
An employment tribunal shall not consider a complaint under this section unless it is presented to the tribunal— (a) before the end of the period of three months beginning with the effective date of termination, or (b) within such further period as the tribunal considers reasonable in a case where it is satisfied that it was not reasonably practicable for the complaint to be presented before the end of that period of three months.Read the section on legislation.gov.uk
Three months, from termination not from the incident
The period runs from the effective date of termination. In a constructive dismissal that is your resignation taking effect, not the conduct you are complaining about — which may have been months earlier. Acas early conciliation is compulsory before any claim and pauses the clock while it runs.
The extension test is narrower than people assume
A tribunal may allow longer only where it is satisfied that it was not reasonably practicable to claim in time. Compare that with the Equality Act, where the tribunal may allow such other period as it thinks just and equitable — a materially wider discretion.
| Constructive / unfair dismissal | Discrimination | |
|---|---|---|
| Provision | ERA 1996 s.111(2) | EqA 2010 s.123 |
| Runs from | The effective date of termination | The date of the act complained of; conduct extending over a period is treated as done at the end of it |
| Extension | Only where not reasonably practicable | Such other period as the tribunal thinks just and equitable |
| Qualifying service | Normally 2 years | None |
If both are in play, the two limits can expire on different days. What else changes when discrimination is involved.
What the settlement is worth
The same arithmetic as anywhere else on this site: a fixed floor and a negotiated element.
The same diagram as a table
| Part | What it covers | Amount | Tax treatment |
|---|---|---|---|
| Part 1 — contractual | Notice pay, holiday pay, unpaid wages, bonus or commission | £8,600 | Income tax and National Insurance in full |
| Part 2 — ex gratia | Statutory redundancy pay, compensation for loss of employment, injury to feelings | £15,000 | First £30,000 free of tax and National Insurance |
| Total | — | £23,600 | — |
Threshold figure: Income Tax (Earnings and Pensions) Act 2003, s.403(1). Illustrative amounts.
The floor is smaller here than in a redundancy
In a constructive dismissal there is usually no statutory redundancy payment, because the dismissal is not a redundancy. What remains fixed is notice — and even that is contested terrain, because an employer disputing the constructive dismissal may also dispute that notice is owed at all.
The result is that a larger share of a constructive dismissal settlement is genuinely negotiated than in a redundancy, where much of the package is statutory entitlement wearing a bow.
What moves the negotiated part
What it would cost the employer to defend: legal fees they will mostly not recover even if they win, management time, disclosure, and the risk of a finding. A documented grievance, a process that looks decided in advance, and any discrimination element all raise that cost. The full list, and how to use it · run your own figures.
And the document still has to work
Whatever is agreed, the agreement only stops you claiming if all six conditions in s.203(3) are met. What the document contains, clause by clause · who pays for the advice it requires.
Common questions
Can I get a settlement agreement for constructive dismissal?
Yes, and it is one of the commonest situations in which one is offered — usually after a grievance has been raised and before anyone resigns. The agreement buys your waiver of the claim; what it is worth depends on how strong that claim is and what defending it would cost.
Do I have to resign first?
For a constructive dismissal claim, yes. Section 95(1)(c) of the Employment Rights Act 1996 defines it as the employee terminating the contract in circumstances entitling them to do so without notice because of the employer's conduct. No resignation, no dismissal, no claim. That is precisely why negotiating before you resign is usually the stronger position — you still hold something you have not yet spent.
Is being constructively dismissed the same as winning?
No, and this is the most expensive misunderstanding in this area. Establishing that you were dismissed only gets you to the starting line. Section 98 then puts the burden on the employer to show a reason and that it was a potentially fair one, and the tribunal decides whether they acted reasonably. Both stages have to go your way.
I am already on notice. Can I leave early and still claim?
Section 95(2) covers this. If the employer has given you notice and you give shorter notice within that period, you are still treated as dismissed — and the reason for the dismissal is taken to be the employer's reason, not yours. Leaving early in that situation does not convert a dismissal into a resignation.
How long do I have?
Three months from the effective date of termination, under s.111(2). The extension is narrow: the tribunal may allow longer only where it was not reasonably practicable to claim in time. That is a tighter test than the 'just and equitable' discretion that applies to Equality Act claims, so a matter with both in it can have two different clocks running on the same facts.
Does the tribunal publish constructive dismissal figures separately?
No. In the MoJ and HMCTS quarterly statistics, constructive dismissal sits inside the unfair dismissal jurisdiction rather than being counted on its own, so there is no published national figure for it. We are not going to estimate one.
Should I raise a grievance first?
It is worth taking advice before deciding. A grievance creates a documented dispute, which matters both evidentially and for whether any settlement conversation is protected at all. It also gives the employer an opportunity to put the problem right, which can cut either way depending on what you want the outcome to be.
What if there is discrimination in it as well?
Then you have two claims with different rules, and the agreement has to settle both. A discrimination complaint needs a qualifying settlement agreement under s.147 of the Equality Act 2010, which is a different section from the one that settles unfair dismissal. It also has no qualifying service requirement and no statutory cap on compensation.
Sources cited on this page
- Employment Rights Act 1996, s.95 — circumstances in which an employee is dismissed
- Employment Rights Act 1996, s.98 — fairness of the dismissal
- Employment Rights Act 1996, s.111 — complaints to an employment tribunal
- Employment Rights Act 1996, s.203 — conditions for a valid settlement agreement
- Employment Rights Act 1996, s.111A — pre-termination negotiations
- Equality Act 2010, s.123 — time limits
- Acas — Unfair dismissal
- GOV.UK — Employment tribunals
- MoJ / HMCTS — Tribunals statistics quarterly: April to June 2026
Every figure above was read from the source it is attributed to on 19 September 2026. How we check this.
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