By Zaynab Aly

When we hear the term unfair dismissal, we always think of situations where employers terminate staff without a proper process or a valid reason – and for the most part, this is the most common type of claim. However, there’s also a form of unfair dismissal called constructive dismissal – where an employee has resigned, but this is because they were forced to do so.

In this article, I explain what constructive dismissal is, how the law has shaped this area, and why employers should approach this situation with caution.

So, what is constructive dismissal?

The onus of proof is upon the employee to show that the employer forced them to resign. Where an employee has been constructively dismissed, this will constitute a dismissal to make an unfair dismissal claim. Such claims are brought before the Fair Work Commission (the Commission) and must be made within 21 days of termination. Where the dismissal is found to have been unfair, the Commission may order penalties such as in the form of reinstatement or compensation.

The Fair Work Act 2009 (Cth) defines dismissal as where:

  • the person’s employment with his or her employer has been terminated on the employer’s initiative; or
  • 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.

When we look at constructive dismissal, we are considering the second scenario here: that a person has resigned but has done so because they had no option following their employer’s conduct. Essentially, the employment has come to an end from the employer’s initiative.

How has the law shaped constructive dismissals?

What we see with constructive dismissals is that it can be difficult to distinguish between situations where an employee chose to resign on their own initiative and where it’s due to the employer’s initiative. The test, summarised in the case of O’Meara v Stanley Works Pty Ltd, is whether the actions of the employer were intended to bring about the end of employment, or would have the likely result of ending employment and whether the employee was left with no real choice other than to resign.

In the more recent case of James McKay v Astro Aero Pty Ltd, an employee handed in his resignation because his employer had been on average three weeks late in paying his wages over the preceding six months. While the employer contended that he had options available to him other than resignation, the Commission commented that its conduct had caused the employee to lose confidence that the wages would be paid on time moving forward. Ultimately, the Commission found that the frequent late payment of wages was of such magnitude and frequency that he was left with no other reasonable choice but to resign, and therefore that he had been dismissed.

How should employers approach this situation?

Ensuring you take the best-practice approach to the end of employment is vital to mitigating the risk of constructive dismissal claims.

There are also situations where a resignation might be given verbally, in the heat of the moment or other special instances. When this occurs, it’s always a good idea to clarify the employee’s intentions regarding their employment with them afterwards. Remember that resignations given during moments like this may not necessarily be true resignations, and it’s best practice to confirm with the employee after giving them a reasonable amount of time to decide whether their intentions to resign are real or not. It’s also best practice to request written resignations from your employees.

While we always see more clearly in hindsight, there’s a proactive element to avoiding constructive dismissals; ensuring your policies and procedures are compliant, staff entitlements are being paid correctly, and the workplace is meeting all Work Health and Safety requirements. Failing to meet such obligations could result in an employee’s resignation being considered a constructive dismissal.

If this article has raised any concerns about employees, resignations, or terminations, or you need support with another workplace matter, please reach out to our team at HR Assured via our 24/7 Telephone Advisory Service.

Zaynab Aly is a Workplace Relations Consultant at HR Assured. She has a particular interest in the retail industry and regularly provides advice on workplace matters to find solutions for clients.