Constructive Dismissal
No choice but to resign? You may have a constructive dismissal claim
There are many reasons that people might choose to leave a role. But some of them might not really be a choice. For example, what if your employer suddenly cuts your pay, refuses to address ongoing workplace bullying, demotes you without supplying a valid reason or repeatedly fails to pay your wages and entitlements? In situations like these, you might feel like you have no real choice but to resign.
Most people assume that once they resign they lose the right to bring an unfair dismissal case. But that’s not true. If an employer’s conduct effectively forces an employee to leave their job, the law may treat that resignation as a dismissal. This is known as constructive dismissal.
Let’s examine constructive dismissal and an employee’s rights under the Fair Work Act 2009 to bring an unfair dismissal claim against their former employer.
What is constructive dismissal?
Most unfair dismissal claims arise when an employer directly terminates a worker’s employment. Constructive dismissal is different.
A constructive dismissal occurs when an employee resigns (apparently voluntarily) because their employer’s conduct has made it unreasonable for them to stay. Although the employee technically chose to resign, if it looks like constructive dismissal, the law may treat the resignation as dismissal if the employer’s actions (or inactions) left them with no real choice.
This can happen when an employer seriously breaches an employment contract or fails to meet its legal obligations. For example, an employee may feel forced to resign because of:
- or sexual harassment
- An unreasonable demotion or other unfair treatment
- Underpayment of wages or a significant reduction in pay or hours
- Serious workplace health and safety concerns
When an employer displays unacceptable or illegal conduct towards an employee or fails to stop co-workers from harassing the employee, the employee may have no choice but to resign.
In these situations, the key question is whether the employee genuinely chose to leave or whether the employer’s conduct effectively forced the resignation.
Other types of constructive dismissal
Workplace bullying, harassment or other conduct that makes it impossible for an employee to remain in their role aren’t the only situations where a resignation may be treated as a dismissal.
Courts have also recognised constructive dismissal where an employee is pressured into resigning or where an employer’s actions effectively prevent them from performing their job.
As with all constructive dismissal claims, the central question is whether the employee genuinely chose to resign or whether the employer’s conduct left them with no reasonable alternative.
Resignation or termination
A constructive dismissal can also occur where an employer gives an employee the option to resign or face termination. A well-known example is the case of Mohazab v Dick Smith Electronics (1995).
In that case, Mr Mohazab, an employee of Dick Smith Electronics, was questioned about missing stock. During the meeting, he was told he could either resign or face a police investigation, and was presented with a resignation letter to sign.
When Mr Mohazab brought a wrongful termination claim, the employer argued that he had voluntarily resigned to avoid a criminal investigation. The Industrial Relations Court of Australia rejected that argument. It decided that the ultimatum to resign or face a police investigation was effectively an initiation of termination and that the resignation was not genuinely voluntary. Faced with the ultimatum, Mr Mohazab had no real choice but to resign.
The case remains an important example of how a resignation can be treated as a dismissal where an employee is pressured into leaving their employment.
Removal of access or tools
It is also constructive dismissal if an employer takes away the equipment, access or resources an employee needs to do their job. However, proving a claim on this basis can be difficult.
In McKean v Red Energy Pty Ltd (2020), the employee argued that he was forced to resign because he was required to work from home without the necessary equipment, namely a company-provided desk. The Commission rejected this, noting that the employee’s resignation letter made no reference to compulsion, and he had options other than resigning. He could have contacted WorkSafe about his concerns or even borrowed a desk from a friend. In fact, the employee had subsequently purchased a desk after his resignation.
The decision underlines that not every disagreement about equipment or workforce arrangements will meet the high threshold for constructive dismissal.
How the Commission assesses constructive dismissal
Constructive dismissal needs to be proven, of course. To do so, an employee needs to show more than just that they were unhappy at work or that their employer acted unfairly. They also have to demonstrate the employer’s conduct left them with no reasonable choice but to resign.
The onus is on the employee to prove that the employer’s conduct was the principal contributing reason they left their employment. The Fair Work Commission will consider whether there were any realistic alternatives available and whether resignation was genuinely a last resort. In many cases, the Commission will also consider whether it was unreasonable for the employer to ask the employee to endure the conduct or expect them to remain employed while the employer looked at other options.
Practical application
It’s one thing to understand the law, but how does the Commission approach this assessment in practice?
In Kylie Bruce v Fingal Glen Pty (2013), a receptionist resigned after repeatedly receiving her wages late and not being paid superannuation throughout her employment. She had raised concerns with senior management and explained in her resignation letter that she could no longer cope with the stress caused by her employer’s failure to meet its obligations.
While the tribunal accepted that the employer’s failure to pay was effectively a termination initiated by the employer, it held that wages were paid (albeit late), and the employee had other options. For example, she could have reported the dispute to her union or the Fair Work Ombudsman. Because resignation wasn’t her only reasonable option, the claim for constructive dismissal was unsuccessful. The decision was later upheld on appeal.
A different outcome was reached in a more recent decision, Bupa Aged Care Australia Pty Ltd T/A Bupa Aged Care Mosman v Shahin Tavassoli (2018). In that case, the employee had been subjected to persistent and serious failures to pay wages for a six-month period. He repeatedly raised the issue with management and had also contacted the Fair Work Ombudsman, but the problem remained unresolved.
The Fair Work Commission found that the employee had exhausted his available options and could no longer rely on his employer’s promises that the issue would be fixed. In those circumstances, his resignation was found to be a constructive dismissal.
Together, these cases demonstrate that there is a high threshold for constructive dismissal. The Commission will closely examine the employer’s conduct, the steps taken by the employee and whether resignation was truly the only reasonable course of action.
Understanding your rights after resigning
Constructive dismissal recognises that not every resignation is truly voluntary. Where an employer’s conduct leaves an employee with no reasonable choice but to leave their job, the Fair Work Commission may treat the resignation as a dismissal for the purposes of an unfair dismissal claim.
However, establishing constructive dismissal can be difficult. So, if you believe you were forced to resign, or if you are an employer facing a constructive dismissal claim, contact Armstrong Legal. Our employment lawyers can advise you on your rights and obligations, assess the strength of your case and help you navigate the unfair dismissal process.
