Constructive Dismissal

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By Paul Spoto, Associate and Troy Wild, General Manager – Legal & Workforce 

Most employment relationships will end on a mutual and clear understanding, with one party informing the other of its intention to end the employment, or in some cases with the agreement of both parties.   

There are, however, instances where an employer's conduct may amount to a repudiation of the contract. Repudiatory conduct occurs where an employer demonstrates, by certain words or conduct, that it does not intend to be bound by the terms of the contract of employment. This can sometimes lead to an employee’s resignation, which may be considered a forced resignation or a ‘constructive dismissal’. 

In such cases, an employee essentially contends that the employer’s conduct left them with no reasonable alternative but to resign. The circumstances for constructive dismissal are generally considered narrow, as was found in a leading case on the matter Mohazab v Dick Smith Electronics Pty LTD (No.2) [1995] IRCA 645. 

Constructive dismissal found to have occurred 

In the above case, Mr Mohazab was an employee of Dick Smith Electronics. During questioning about the disappearance of stock in the store the employee was told to either resign or face a police investigation. 

The employer prepared a letter of resignation and asked Mr Mohazab to sign it. Mr Mohazab subsequently brought an unlawful termination claim. Dick Smith argued that Mr 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 employer's initiative. This was because Mr Mohazab had no effective or real choice but to resign, and it was only because of his employer’s action that termination had occurred. 

Another notable decision where a constructive dismissal was found to have occurred is the case of Rind v Australian Institute of Superannuation Trustees [2013] FWC 3144. 

In this case, the Commission held that an employer who refused to provide part-time work to an employee returning from parental leave had acted unreasonably, including that the request was made in accordance with the relevant enterprise agreement, and further, that the company had made no effort to replace a company contracted to do the work on a part-time basis with a full-time employee since the refusal. 

The Commissioner found specifically that by refusing to grant the employee part-time work, the employer engaged in conduct that justified the employee to consider and treat the employment at an end because there was an unreasonable refusal on the part of the employer to perform its obligations owed to the employee under the terms of the Enterprise Agreement. The Commission ultimately found that the employee had been constructively dismissed. 

Constructive dismissal found not to have occurred 

Not being paid wages and/or superannuation can also constitute constructive dismissal; however, not always. As the case in Bruce v Fingal Glen Pty Ltd [2013] FWC 3941 where the payment of wages a couple of days late was not regarded as a forced resignation or constructive dismissal. 

Further examples where the Commission did not find a constructive dismissal include: 

• Where the employee had been made redundant but was required to work out a notice period. The employee left the workplace and took sick leave, during which time the employer cut off his access to the IT system. The employer then invited the employee to return to work after his sick leave. The Commission held that the employee had been offered options to continue in employment and, in that context, could not rely on the removal of his IT access to establish that he was forced to resign. McAllister v In Control Pty Ltd [2013] FWC 3155.

• An employee who was asked to attend a meeting to discuss complaints about her conduct subsequently went on sick leave and made a rejected workers' compensation claim. Five months later, she resigned and claimed constructive dismissal. The Commission found that the employee could not “meet the onus she bears of establishing that she was forced to resign”. Bray v Corporation of the Synod of the Diocese of Brisbane [2013] FWC 7805 

It should be noted that the onus is always on the employee to prove that they did not resign voluntarily. The employee must prove that the employer left the employee with no reasonable choice but to resign.