Constructive Dismissal Policy Template

Most organizations recognize the importance of treating employees fairly during layoffs or terminations. But less obvious — and just as important — is avoiding the kind of environment that might pressure someone to quit. When an employee resigns because their working conditions have become intolerable or their job has changed dramatically without consent, that’s known as constructive dismissal.

Even though the resignation may appear voluntary, if it was prompted by a breach of contract, significant job change, or toxic work environment, it could legally be treated as a termination initiated by the employer. The implications for employers are serious: lawsuits, financial penalties, and reputational damage.

A clear constructive dismissal policy helps prevent these outcomes by educating leaders and employees about their rights and responsibilities. It outlines what constructive dismissal is, how [Company Name] works to avoid it, and what steps employees can take if they feel they’re being pushed out.

What the Constructive Dismissal Policy Should Include

An effective constructive dismissal policy should help employees and managers understand:

• What constitutes constructive dismissal: Define the concept and provide real-world examples.
• How the company prevents constructive dismissal: Outline cultural, legal, and procedural guardrails that protect employees.
• The process for raising concerns: Help employees know where to turn when they feel their work environment has become hostile or unfair.
• How complaints are handled: Clarify investigation procedures, communication timelines, and documentation expectations.
• Protections from retaliation: Reinforce that employees can speak up safely.
• Legal compliance: Reaffirm commitment to labor laws and fair treatment.

These elements not only mitigate risk but also contribute to a psychologically safe culture where employees feel supported, heard, and empowered.

Purpose of the Constructive Dismissal Policy

The purpose of this policy is to promote transparency, fairness, and legal compliance in how we manage the employee experience — especially during challenging or transitional periods.

Specifically, this policy is designed to:

• Prevent conditions that might lead an employee to feel forced to resign.
• Clarify how constructive dismissal differs from regular resignation.
• Provide employees with a safe and clear way to raise concerns about workplace treatment.
• Reinforce [Company Name]’s values of equity, respect, and accountability.
• Protect the company from legal liability and reputational harm.

By being proactive, we aim to resolve issues early — before they escalate into employee departures or legal claims.

Sample Constructive Dismissal Policy

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Effective Date: [Insert Date]
Policy Owner: People Team / Legal Department
Last Reviewed: [Insert Date]

1. Policy Overview

[Company Name] is committed to fostering a fair, respectful, and supportive work environment. This policy outlines what constitutes constructive dismissal, how the company works to prevent it, and what an employee should do if they believe they are being subjected to conditions that could force their resignation.

This policy applies to all full-time and part-time employees and contractors where applicable, across all departments and locations.

2. What Is Constructive Dismissal?

Constructive dismissal occurs when an employee resigns because their employer has made fundamental changes to the terms of their employment without consent, or has created a hostile or intolerable work environment.

This can include — but is not limited to — the following examples:

• Significant pay cuts or the removal of essential benefits without agreement.
• Demotion or reassignment to a substantially different role without explanation or discussion.
• Changes in working hours, location, or conditions that materially impact the employee’s ability to perform their job.
• Bullying, harassment, or discrimination, especially when reports are ignored or not properly addressed.
• Unreasonable disciplinary actions or punitive performance reviews used to pressure the employee to quit.
• Withholding earned commissions or bonuses without cause.
• Exclusion from meetings, communications, or responsibilities that previously were part of the employee’s role, as a pattern of marginalization.

To qualify as constructive dismissal, the change or treatment must be serious enough to constitute a breach of contract or make continued employment unreasonable.

3. Our Commitment to Prevention

At [Company Name], we are committed to proactively preventing the kinds of situations that can lead to constructive dismissal. We do this by:

• Providing training for managers on respectful leadership, equitable treatment, and employment law basics.
• Clearly documenting job expectations and employment terms.
• Ensuring any major change to an employee’s compensation, responsibilities, or status is discussed and agreed upon in writing.
• Promoting a feedback culture where employees feel safe voicing concerns early.
• Conducting regular reviews of compensation and job structures to identify and correct inequities.
• Following a consistent and transparent process for promotions, performance reviews, and disciplinary action.

We believe that most issues can be resolved through early communication and good faith efforts — long before resignation becomes a consideration.

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4. Reporting a Concern

If you believe your working conditions have changed in a way that could constitute constructive dismissal, or you’re experiencing treatment that feels coercive or punitive, we encourage you to raise the issue immediately.

You can take the following steps:

1. Speak with your direct manager or a People Partner to clarify expectations or share your concern.
2. Submit a written complaint to HR or the People Team if the issue involves your manager or cannot be resolved informally.
3. Request a meeting with a neutral HR representative to discuss your experience and explore possible solutions.
4. Participate in an internal investigation, if needed, by sharing any relevant documentation or communication.

All complaints will be treated seriously and investigated promptly, with the goal of resolving the issue and ensuring fair treatment for everyone involved.

5. Non-Retaliation Policy

[Company Name] strictly prohibits retaliation against any employee who raises a concern in good faith, whether or not the concern is ultimately substantiated.

This means:

• You will not be demoted, reassigned, harassed, or terminated for making a report.
• Any employee found to have retaliated against a colleague will be subject to disciplinary action, up to and including termination.
• We encourage all employees to support a culture where feedback — even critical feedback — is welcomed and respected.

6. Legal Compliance and Risk

Constructive dismissal may be legally classified as an involuntary termination, which means employers can be held responsible for severance, legal damages, and penalties. To remain compliant with employment laws and reduce the risk of constructive dismissal claims, [Company Name] is committed to:

• Reviewing our employment practices regularly.
• Staying up to date with federal, state, and local regulations.
• Ensuring contracts and offer letters clearly reflect role expectations and compensation.
• Conducting pay equity and role fairness audits.

Employees with legal questions are encouraged to seek advice from HR or an independent employment law expert.

Frequently Asked Questions

1. How is constructive dismissal different from regular resignation?
Regular resignation happens voluntarily. Constructive dismissal happens when an employee resigns because the employer has made working conditions intolerable or has breached the terms of their contract.

2. If I resign due to constructive dismissal, can I still get severance?
Possibly. If a legal body determines that your resignation meets the criteria for constructive dismissal, you may be entitled to severance or compensation — similar to a termination. This is determined on a case-by-case basis.

3. What should I do if I feel my job has changed dramatically?
First, raise the issue with your manager or People Partner. There may be context or business reasons for the change, and it’s often possible to work together on a solution. If you’re still concerned, document your experience and escalate to HR.

4. Is constructive dismissal only about pay cuts or demotions?
No — it can also include emotional or psychological conditions that make it unreasonable to stay, such as repeated harassment, exclusion, or ongoing stress due to managerial misconduct.

5. What kind of documentation should I keep?
Save any written communications related to your role, responsibilities, compensation, complaints, or changes. This includes emails, performance reviews, updated job descriptions, and any formal complaints you’ve submitted.