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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 the Definition of 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.

It is important to note that in determining whether or not the dismissal has been a constructive dismissal, whether you wanted the employee to resign is irrelevant.

Examples of Constructive Dismissal

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

  • employee had been spitefully assigned unpleasant or pointless work;
  • employer failed to take action when an employee was repeatedly attacked by dogs while 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. 

Risks to the Employer

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 on 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.

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, contact LegalVision’s employment lawyers on 1300 544 755 or fill out the form on this page.

FAQs

What is constructive dismissal?

Constructive dismissal is where an employee resigns because they have no other option due to your action or inaction as the employer. This is also called forced resignation. 

When can an employee make a personal grievance claim?

An employee can make a personal grievance claim if they have been dismissed and it is a constructive dismissal. 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.

What constitutes constructive dismissal?

Constructive dismissal could be where an employer spitefully gives an employee unpleasant work, fails to pay an employee’s wages, changes an employee’s working conditions without consultation or fails to protect the employee. 

What does not constitute constructive dismissal?

Constructive dismissal may not have occurred where an employer gave an employee reasonable instructions, the employee independently decides to resign or the employee did not inform the employer of issues they were facing and did not give the employer the opportunity to help. 

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