What is Constructive Dismissal or Forced Resignation?

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Table of Contents

• What is Constructive Dismissal?
• Examples of Constructive Dismissal
• What Are the Differences Between Forced Resignation and a Voluntary Resignation?
• What Are the Risks of Terminating Employment?
• Key Takeaways
• Frequently Asked Questions

An employee can sometimes resign because they have no other option due to your action or inaction as the employer. This is called constructive dismissal or forced resignation. If you refrain from doing something or do something in a way that makes the situation at work so unbearable for the employee that the employee has no other choice but to resign, this can be seen as a constructive dismissal. An employee can make a personal grievance claim if they have been dismissed in this way. This article will: 

• outline the definition of constructive dismissal;
• provide examples of it; and
• outline risks you can face as an employer

What is Constructive Dismissal?

There are three broad categories of constructive dismissal. These are where you:

• give an employee a choice between resigning or dismissal;
• deliberately act so as to pressure the employee to resign; or
• have acted so badly (for example, breaching the employment agreement) that the employee feels they can no longer remain in the job.

The main test is whether:

• your actions or inactions caused the employee to resign; and 
• the resignation was foreseeable.

Examples of Constructive Dismissal

The court must consider whether constructive dismissal has occurred on a case-by-case basis. Some examples include where an:

• employer has spitefully assigned unpleasant or pointless work to an employee;
• employer failed to take action when dogs repeatedly attacked an employee who was trying to perform their duties;
• employee worked excessive hours under a lot of stress;
• employer failed to pay the employee’s wages on multiple occasions;
• employer moved an employee from a permanent contract to a casual one, and the employee could no longer provide for themselves; and
• employer significantly reduced an employee’s hours without consultation or agreement with the employee.

Some case examples where the court held that a constructive dismissal did not occur include where an:

• employer had a reasonable belief that an employee was not in a fit state of mind to carry out their job and suggested they resign (accordingly, the employee did so but then changed their mind);
• employer gave a reasonable instruction to a employee which was within their scope of employment;
• employee was suffering from work-related stress and did not mention it to their employer, meaning that the employer did not have a chance to help remedy or manage the stress; and 
• employer had a problematic history with an employee, and speaking to the employee resulted in them resigning against the employer’s wishes. 

What Are the Differences Between Forced Resignation and a Voluntary Resignation?

Whether you terminated an employee because of a forced resignation or whether they voluntarily resigned has a large impact on various employment entitlements, including whether the employee can bring a successful personal grievance claim for unjustified dismissal.

For an employee to bring a personal grievance on the grounds of unjustified dismissal, you must have dismissed them. Ordinarily, if an employee voluntarily resigns, you would not have dismissed them and cannot bring a claim. On the other hand, if you forced an employee to resign, it could amount to a dismissal, and they may be able to bring an unfair dismissal claim.

What Are the Risks of Terminating Employment?

If an employee feels their dismissal has been a constructive dismissal, they can make a personal grievance claim. If the employee wishes to make this claim, they will need to make the claim within 90 days of becoming aware of the issues of their dismissal. Employees can bring a personal grievance claim for a number of other reasons, including:

• unjustifiable action which disadvantages the employee;
• discrimination;
• sexual harassment;
• racial harassment; or
• disadvantage to an employee due to the employment agreement not meeting legal requirements.

While this is not the only ramification of an employee being terminated by a constructive dismissal, this is the most common one. It becomes important when determining the risks to your business post-employment. As an employer, you need to be aware that your conduct with your employees can amount to additional risks of termination. Simply because an employee resigns does not mean there is no risk to your business. You should be open and clear with your communication with your employees at all times.

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Key Takeaways

As an employer, it is essential that you are aware that your behaviour can place employees in a position where they have no choice but to resign. You also need to understand the implications of constructive dismissal and the impact it can have on your business. It is essential to obtain advice on how to terminate employees if you are looking to pursue that pathway. You must ensure you have everything correct procedurally and make sure there is a clear line of communication between you and your employees.

If you have any questions about managing your employees, our experienced employment lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0800 005 570 or visit our membership page.

Frequently Asked Questions