Constructive dismissal: Employer conduct causing resignation

Resigning from a job can be a difficult decision to make, especially when the reasons for doing so are out of your control. Workers can find themselves feeling as though they have no choice but to leave their employment because of bullying, poor treatment, underpayment of entitlements, serious safety concerns or because they have been offered a resignation rather than termination and decided it was the best option for them for them to take. 

Once they have had time to consider the events, employees can realise that they have been treated badly and approach their unions for assistance after resigning from their employment, or often seek legal advice. 

What is constructive dismissal?

A constructive dismissal, or constructive resignation, occurs when an employee resigns from their position, but the termination of employment is deemed to be at the initiative of the employer. The legal position is that the employment relationship was brought to an end by the employer's conduct, even though it was the employee who in fact resigned and the decision to resign can be treated as a dismissal.

If a worker seeks advice about whether to resign, other alternatives, including grievances, industrial disputes, should be considered first because the legal bar to establish a constructive dismissal is a high one to jump. The use of the word 'forced' in the Fair Work Act is an indicator of the high threshold that has to be met to establish the worker essentially had no other choice but to resign from their employment because of the actions of their employer.

What can an employee do if they've left a job due to constructive termination?

After an employee resigns, their options to address the conduct of their employer, and in particular the termination, may be limited by their decision to leave the employment relationship. This is unless the resignation can be found to have brought about by the conduct of the employer. 

In general terms, for an employee to take action in response to the termination of employment, the employment must have come to an end at the initiative of the employer. The Fair Work Act 2009 specifies that a person has been dismissed, for the purposes of an unfair dismissal claim, if:

• a)    the person's employment with his or her employer has been terminated on the employer's initiative; or
• b)    the person has resigned from his or her employment, but was forced to do so because of conduct, or a course of conduct, engaged in by his or her employer.[1]

What is an example of constructive dismissal?

Whether a constructive dismissal can be established will depend on the facts of each case.

An example of constructive dismissal is a leading Australian case, Mohazab v Dick Smith Electronics [2]. Mohazab was an employee of Dick Smith Electronics. During questioning about the disappearance of stock in the store the employee was told that he was to either resign or face a police investigation.

A letter of resignation was prepared by the employer and given to Mohazab to sign. After this occurred, Mohazab brought an unlawful termination claim, and Dick Smith argued that Mohazab had voluntarily resigned because of his concerns regarding the police. The court decided that the decision to resign or face police investigation amounted to termination at the initiative of the employer. This was because Mohazab had no effective or real choice but to resign, and it was only because of his employer's action that termination had occurred.

The case of O'Meara v Stanley Works Pty Ltd [3]considered other cases in relation to constructive dismissal and summarised the legal test to be applied in deciding whether a resignation is a constructive dismissal, finding a requirement that there be:

"some action on the part of the employer which is either intended to bring the employment to an end or has the probable result of bringing the employment relationship to an end. …  In determining whether a termination was at the initiative of the employer an objective analysis of the employer's conduct is required to determine whether it was of such a nature that resignation was the probable result or that the .. [employee] had no effective or real choice but to resign."

Significant constructive dismissal cases from Fair Work Commission in 2013

The Fair Work Commission considered a number of applications asserting constructive dismissal in the last year. The most significant of those was Kylie Bruce v Fingal Glen Pty Ltd T/A Comfort Inn Adelaide Riveriera (Fingal Glen)[4].  

In this case, the employee worked for the employer as receptionist for approximately one year. The employee gave evidence that her wages were often paid late and that she was not paid superannuation during her employment. She also gave evidence of the steps she had taken to address the issue including making a complaint to interstate based senior management.

Her resignation letter confirmed she was resigning because of the late payments, lack of superannuation payments and being 'no longer able to deal with the stress of my basic entitlements being neglected.'

Despite finding that "it is clear that a failure on the part of an employer to pay the employee can amount to termination at the initiative of the employer, or for that matter, can be described as a course of conduct engaged in by the employer that forced an employee to resign", Senior Deputy President O'Callaghan held that because late payments of up to four days were not a failure to pay at all and the conduct could be dealt with in other ways - including by the union running a dispute under the Award or reporting the matter to the Fair Work Ombudsman - the employer's behaviour fell short of leaving the employee with no choice but to resign. He stated that the employee's decision to resign was "perfectly reasonable" but the employer's non-compliance was not of such a magnitude that it could be found she had no choice but to resign.

A Full Bench of the Commission then found that the Senior Deputy President had applied the correct legal test and refused permission to appeal.[5]

The following cases from 2013 provide further examples where the Commission did not find a constructive dismissal:

• The applicant had been made redundant but was required to work out his notice period. The applicant left the workplace and took sick leave during which time the employer cut off his access to the IT system. The employer then invited the employee to return to work after his sick leave. The Commission held that the applicant had been offered options to continue in employment and in that context could not rely on the removal of his IT access to establish that he was forced to resign.[6] 
• A worker who was asked to attend a meeting to discuss complaints about her conduct, subsequently went on sick leave and made a workers' compensation claim that was rejected. Five months later she resigned and claimed constructive dismissal. The Commission found that the employee could not "meet the onus she bears of establishing that she was forced to resign."[7]

In contrast, another notable decision of 2013 confirmed a constructive dismissal in the case of Rind v Australian Institute of Superannuation Trustees[8].

In this case the Commissioner held that an employer who refused to provide part-time work to an employee returning from parental leave had acted unreasonably for reasons including that the request was made in accordance with the relevant enterprise agreement and the company had made no efforts to replace a company contracted to do the work on a part-time basis with a full time employee since the refusal.

He went on to find that given the unreasonable refusal to grant the request for part-time work, he was "satisfied that the Company engaged in a course of conduct that justified Ms Rind treating the employment at an end because there was an unreasonable refusal to perform the Company's obligations to Ms Rind under the terms of the Enterprise Agreement' and found the employee had been constructively dismissed.  

Each constructive dismissal turns on its facts. Given the difficulty in determining how an employer's conduct is likely to be viewed by the Commission in each matter and the difficult legal test to meet to establish the employee had no option other than to resign in response to their employer's conduct, a claim for constructive dismissal should be considered predominantly in circumstances where a member seeks your advice after they have already resigned and other legal options are not available to them. 

Understanding your rights around constructive termination can be complicated. At Maurice Blackburn, we have a specialised team for unfair dismissal cases who can help you understand your options, get in touch today. 

_{[1] Fair Work Act 2009 s386(1)
[2] (1995) 62 IR 200
[3] AIRC Print N6999, December 1996
[4] [2013] FWC 3941
[5] [2013] FWCFB 5279
[6] [2013] FWC 3155
[7] [2013] FWC 7805
[8] [2013] FWC 3144}