Australia: Constructive dismissal – when is a resignation not a resignation?

Last Updated: 25 August 2017
Article by Emily Dempster

Emily Dempster looks at some case examples that highlight what employers need to be aware of when considering constructive dismissal in their workplace.

In Brief: It is a commonly held misconception that employees who resign from their employment are unable to make dismissal-related claims. Based on this mistaken belief, employers often take steps to 'encourage' problem employees to resign from their employment, whether by way of making express suggestions to the employee to this effect or by way of engaging in conduct which encourages the employee to resign.

The above approach is problematic. Employees who resign from their employment because of conduct engaged in by the employer are considered to have been constructively dismissed. Further, employees who have been constructively dismissed are entitled to make dismissal-related claims notwithstanding the fact that they have technically resigned from their employment.

What you need to know

  • Employees who have been forced to resign from their employment due to conduct engaged in by the employer are taken to have been constructively dismissed from their employment.
  • Employees who have been constructively dismissed are entitled to make dismissal-related claims (including, but not limited to, unfair dismissal) notwithstanding the fact that they technically resigned from their employment.
  • Significantly reducing the shifts of regular and systematic casual employees is likely to constitute constructive dismissal.

Examples of Constructive Dismissal

Some common examples of constructive dismissal include:

  • Where an employer suggests that an employee resigns or else they will be dismissed (irrespective of the fact that the employer's intentions may have been to simply make it easier for the employee to find future employment).
  • Where an employee chooses to resign due to the employer's conduct in unilaterally varying the terms and conditions of the employee's employment (such as changing the hours, pay and/or work location).
  • Where an employee resigns because he/she has been subjected to unacceptable conduct (such as bullying by a fellow worker), and the employer has failed to prevent and/or address the issue.
  • Where an employer actively arranges to force an employee out of work by making it impossible for the employee to continue doing his or her job.
  • Where an employer demotes an employee to a position of lesser pay and/or status.

Recent Case Example

In a recent unfair dismissal decision, Balgowan v City of Sydney RSL & Community Club Ltd [2017] FWC 3798, the Fair Work Commission (FWC) determined that a significant reduction in shifts for a regular and systematic casual worker constituted a constructive dismissal.

The reduction of shifts came about due to the pregnant employee's alleged poor cash handling, which resulted in a shortfall of $100 in April 2017. The employee had previously received a warning in December 2016 regarding her poor cash handling procedure. During a meeting in which only the employee and her manager were present, the employee was informed that she was going to be removed from any rostered 'change box' shifts. The manager maintained that she also told the employee that she would be required to undergo training before she would be provided with any further 'change box' shifts. The employee denies that the manager made any reference to any such training.

The employee informed the manager during the meeting that the removal of her rostered 'change box' shifts would provide her with an insufficient number of rostered shifts (noting that it would have resulted in an indefinite reduction in her remuneration of at least 75%) and that this was unfair and that she would go home. The manager alleged that at the end of the meeting, the employee stated words to the effect: "Yes, it's ok, I'll resign. It's fine." The employee rejected that she ever used the word "resign" during the meeting.

Ultimately, the FWC determined that the change imposed by the manager on the employee, namely the removal of all rostered shifts that involved 'change box', represented a repudiation of the employee's employment due to the fact that it would result in an indefinite reduction in remuneration of at least 75%. The FWC determined that in the circumstances, the employee was entitled to reject an alteration to the employment of such significance and to treat the actions of the employer as a repudiation of the employment.

Consequently, the FWC determined that it was the actions of the employer which brought the employment to an end and therefore, the employee was constructively dismissed. Furthermore, the FWC found that the constructive dismissal constituted an unfair dismissal due to the fact that the employer had not afforded the employee with procedural or substantive fairness.

Take Home Messages

A significant issue for the employer in the above case was the fact that there were only two people present at the meeting: the employee and the manager. This resulted in a situation in which the evidence before the Commission was one person's word against the other. It is best practice for an employer to ensure that it has two representatives present at any disciplinary meetings as the second person operates both as the note taker and a prospective witness should the details of the meeting every become relevant in any ensuing litigation.

The above being said, if the employee did in fact verbally resign from her employment during the meeting, it would not in any way negate the constructive dismissal. The reason for this is that the employer's conduct in indefinitely removing the 'change box' shifts resulted in such a significant reduction to the employee's remuneration that she was entitled to treat the employer's conduct as a repudiation of the employment contract. Had the employer perhaps offered alternative shifts to make up for the removal of the 'change box; shifts, the FWC's decision regarding whether the dismissal was at the initiative of the employer may well have been very different.

Conclusion

Forced resignations do not provide protection to an employer in dismissal-related claims. As such, employers should not take steps to actively bring about a resignation in lieu of taking steps to adequately address the issues that have led to the employer wanting to exit the employee from the business in the first place.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. Madgwicks is a member of Meritas, one of the world's largest law firm alliances.

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