Category: The People and Culture Office

“It would be a good idea for you to leave before we have fire you” “Times are tough and everyone needs to take a pay cut of $20,000 per year” “Tamara keeps complaining that Karen is bullying her, I mean that’s just Karen, we all know that, Tamara should just leave if she can’t handle it” “We need to change your work days & hours, I know you’ve said before you can’t work these days because you can’t get childcare but we need to make the change regardless”

Constructive dismissal, or forced resignation, is when an employee has no choice but to resign because of the conduct of the employer. The employer may expressly ask the employee to resign, or the employer’s conduct may leave the employee feeling that he or she has no other choice but to leave their employment.

This conduct generally involves an employer engaging in a serious breach of the employment contract or indicating that it no longer wishes to perform its side of the employment contract. This can include taking actions to make unauthorised variations to the employment contract such as extreme pay-cuts, demoting the employee, dramatically changing their working hours or relocating the employee. It is irrelevant that the employer’s insistence on the employee’s resignation was based on good intentions, for example to save the employee from embarrassment, or, to make it easier for him or her to find future employment; or whether the employer intended or anticipated that the employee would quit their job.

It is not always evident that an employee has resigned involuntarily. It is therefore essential for you, as an employer, to review the events leading up to an employee’s resignation. For example, if an employee resigns in the ‘heat of the moment’, they may argue that they felt they had no other option but to resign. Where a resignation is given in the heat of the moment or under extreme pressure, special circumstances may arise. An employer may be required to allow a reasonable period of time to pass and / or the employer may have a duty to confirm the intention to resign if, during that time, they were advised that the resignation was not intended.

Whether a principal contributing factor in the termination of the employment relationship was an act, or failure to act, on the part of the employer always depends on the individual circumstances of the case. Some examples of constructive dismissal can include:

• where an employee resigns because he or she is told to resign or he or she will be sacked;
• where an employee is subjected to ongoing sexual harassment or discrimination;
• where an employee is subjected to systematic humiliation, verbal abuse or put-downs and adequate proof of this treatment is available;
• where there is a serious and ongoing failure to provide a safe and healthy workplace, the employee has notified the employer of the problem and there is no improvement;
• where an employer actively campaigns to force an employee out of work by acting in such a way as to make it impossible for the employee to continue to do his or her job and adequate proof of this treatment is available; and
• where an employee has been demoted and the demotion involves a significant reduction of the remuneration or duties of the employee.

A clear example of constructive dismissal is found in the case of Hobbes v Achilleus Taxation Pty Ltd ATF (the Achilleus Taxation Trust). Here, an employee resigned after he was paid under half of what he was owed over a period of 4 months. It was decided that it was clearly a situation of forced resignation due to the conduct of the employer, and therefore instead amounted to a dismissal by the employer.

A situation where constructive dismissal was found not to exist was in the case of Bruce v Fingal Glen Pty Ltd (in liq). This concerned an employee who resigned after the employer repeatedly paid wages late, and failed to make any superannuation contributions. The payment of wages were usually 1 to 2 days late, but on occasion were paid even later. The Commission found that while the employer’s conduct was improper, the employee was not in a situation where they were left with no other option that to resign. Therefore, the employee could not argue constructive dismissal.

A leading Australian case on constructive dismissal is that of Mohazab v Dick Smith Electronics. 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.

In a case published by the Australian Government’s Comcare agency, an employee developed a psychiatric condition following persistent bullying as a result of her being promoted to a management position in a restructuring move by her employer. The worker did not receive any management training prior to her appointment as team leader, and there was widespread bitterness in the team about the removal of the previous team leader. Several team members reportedly engaged in increasingly hostile behaviour towards the new team leader, including spreading rumours, disobeying requests, making offensive comments, being rude, and failing to help to the team leader when she was very busy and clearly required assistance. The team members then convened a meeting (too which the bullied employee was not invited), where a document listing complaints about the new team leader was drafted and given to the team leader’s manager. The manager accepted the document, and refused to intervene in any meaningful way when requested to do so by the bullied employee. The bullied employee sought assistance from other managers, who did not intervene, until finally she was forced to leave her position due to the development of a psychiatric condition. The bullied employee took legal action, where a judge found that the employer was negligent in its duties to create a safe working environment. It was found that the managers involved had the capacity to take action that would have prevented the damage caused to the bullied employee, but failed to do so.

The bullied worker received compensation of $339,722 at the expense of her employer as a result of psychological injury acquired in the workplace. This case demonstrates the clear need for employers to be responsive to bullying complaints so that these sorts of cases do not occur. Bullying is an issue that gets worse the longer it is left unaddressed.

All constructive dismissal cases make it clear that employers need to carefully consider their actions and their legal obligations when they decide they wish to be rid of an employee. There is rarely a low-risk shortcut that can substitute proper redundancy discussions or performance management.

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