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Constructive dismissal occurs when an employee resigns and can demonstrate that he or she is entitled to do so because the employer shows by their conduct that they no longer intend to be bound by the essential terms of the employee's employment contract. When this is the case, the employer's conduct is termed a 'repudiatory breach of contract'.
Constructive dismissal can arise in a wide variety of circumstances. In one High Court case (Gibbs v Leeds United Football Club Limited), a football club assistant manager has won a six-figure sum in compensation after a personality clash, a demotion and a failure to give him appropriate work to do combined to render his position untenable.
Nigel Gibbs was employed by Leeds United Football Club on a three-year fixed-term contract at an annual salary of £200,000. However, his employment lasted only 15 months before he resigned. His relationship with his bosses had deteriorated after the senior team's manager, whom he viewed as his mentor, left the club.
Mr Gibbs had expected to be dismissed, but was told to return to work during the off-season when there was little for him to do. It was suggested that he might do some cleaning work in the club's training ground. He did not get on well with the new manager and his resignation was ultimately triggered by his exclusion from performing any meaningful part in senior team training. He was instead confined to working with more junior footballers.
In determining Mr Gibbs' claim of constructive dismissal, the Court had to decide whether, in all the circumstances of the case, Leeds United was in breach of its contract with him, whether that breach was repudiatory and whether, when he resigned, he did so at least partly in response to that breach.
In upholding his claim, the Court found that the club had breached his contract of employment by, amongst other things, failing to give him work to do that was appropriate to his seniority. After he resigned, the club's owner had offered him the position of head coach, but he had been entitled to turn down that offer in the light of his prior treatment.
He was awarded £331,426 in damages against the club, although the Court ruled that he would have to give credit against that sum for performance-related bonuses that had fallen due to him from his new employer – another football club – during the three-year contract period.