Constructive Dismissal: What Is It?

Many Employers are under the impression that if an employee resigns, they are safe from unfair dismissal claims, but there are situations that arise, where an employee may successfully institute an unfair dismissal claim despite the fact they’re the ones who terminated the employment relationship.

The Fair Work Act provides that an employee will be taken to have been “dismissed” if an employee resigns because of conduct or a course of conduct engaged in by the Employer. This is known as constructive dismissal and it’s now expressly provided for in the unfair dismissal provisions of the legislation.

The difficult part is determining when the employer’s conduct is such to make continued employment sufficiently intolerable for an employee’s resignation to constitute a constructive dismissal. It’s impossible to list all the factors that Fair Work Australia will consider, but a classic example is when the employer instructs an employee to resign or face disciplinary action/termination.

The employee’s actions leading up to the resignation will also be analysed and taken into consideration. An employee is expected to have told the employer that he/she has a grievance. In fact one of the factors that played a significant part in a recent decision by Fair Work Australia on constructive dismissal was that the employer consistently ignored the grievances of the employee.

KEY POINT: Employers must therefore remember that a letter of resignation will not necessarily protect them from an unfair dismissal claim. Their conduct towards the employee prior to the resignation plays a significant role in determining whether the resignation will be seen as a true resignation or not. Providing an employee with the option to resign; unreasonable management of an employee; allowing an employee to be subjected to harassment or bullying at work without the employer addressing it; and many more circumstances, are likely to be treated as constructive dismissal if the employee resigns. This is because conduct of this kind may place the employee in the position that they believe is so unreasonable they cannot continue to work for the employer.