Put simply, a constructive dismissal is a forced resignation. It occurs because of an employer’s actions or behaviour and is not a resignation given freely and without undue pressure.

When a resignation is in response to, and consistent with, a desire by an employer that such resignation be forthcoming, then the termination may have been brought about by the employer. As such, the employee has been dismissed.

This circumstance, referred to as a ‘constructive dismissal’ or a ‘forced resignation’, is an unlawful termination of the contract of employment in circumstances where the employee leaves, without an express act or enunciation of ‘dismissal’ by the employer. It will be taken to be a dismissal (hence the word ‘constructive’) if the employer has behaved towards the employee in a way that entitles the employee to treat the employment as at an end.  

The onus is on the employee to prove they did not resign voluntarily, and that the employer forced their resignation. See Australian Hearing v Peary [2009] AIRCFB 680.

The concept here is that there is implied in a contract of employment a term that the employer will not, without reasonable and proper cause, conduct itself in a manner calculated or highly likely to destroy or seriously damage the relationship of confidence and trust between employer and employee. Breach of that implied term will entitle the employee to treat himself or herself as wrongfully dismissed.  

A longstanding authority in relation to this matter is Mohazbad v Dick Smith Electronics [1995] IRCA 272. It stated that ‘an important feature is that the act of the employer results directly or consequentially in the termination of employment and the employment relationship is not voluntarily left by the employee. That is, had the employer not taken the action it did, the employee would have remained in the employment relationship’.  

 

Fair Work Act 

Section 386(1)(b) of the Fair Work Act provides that a person has been dismissed if they resigned from their employment but were forced to do so because of conduct, or a course of conduct, engaged in by their employer. Conduct includes both an act and a failure to act. Section 12 of the Fair Work Act defines the term ‘conduct’ to include an omission. The Fair Work Act reflects the common law concept of constructive dismissal, and allows for a finding that an employee was dismissed in the following situations: 

  • where the employee is effectively instructed to resign by the employer in the face of a threatened or impending dismissal, or 

  • where the employee quits their job in response to conduct by the employer which gives them no reasonable choice but to resign. 

 

Examples 

An employer may demand a resignation with a threat of dismissal, negotiations may then ensue, and the employee may ultimately be genuinely pleased with the outcome of those negotiations, to the extent that any resultant resignation may be said to be given freely and without undue influence being brought to bear by the employer.  

Another example of this is where there are several instances where a single incident of verbal abuse has given rise to a successful claim of constructive dismissal. In some circumstances, even a single serious incident of verbal abuse may be sufficient, depending on its severity, context and impact on the employment relationship.

In one case, a director said to his secretary: ‘She is an intolerable bitch on a Monday morning’, which amounted to constructive dismissal. Also, an assistant manager to an employee: ‘You can’t do the bloody job anyway’, not believing this to be true, was deemed a constructive dismissal. In another case, an employee who was falsely accused of theft was found to have been constructively dismissed. 

 

Reduction in hours

(The then) Fair Work Australia was asked to consider in an unfair dismissal matter whether the employee’s reduction in working hours repudiated the contract of employment. The employment ceased after the employee refused to accept a reduction in hours and a reversion to casual employment. The employer claimed it was not intended for the applicant to cease work altogether but to continue as a casual employee on a reduced number of shifts, and hours reduced due to the applicant’s misconduct.  

The tribunal considered the reduction in hours repudiated the contract of employment therefore the dismissal was at the initiative of the employer. Fair Work Australia determined there was no valid reason for dismissal and the dismissal was harsh and unjust. See Field v The Returned & Services League (Mount Gambier Sub-Branch & Memorial Club) Inc t/a Mount Gambier Community RSL [2011] FWA 5930. 

 

Change in duties

In a matter before (the then) Fair Work Australia, the applicant stated that his removal from the roster was because he was sacked, whereas the respondent employer stated he was being removed from the roster to work in another part of the business until he became more reliable. There was no reduction in pay as a result of the move to other duties.  

The tribunal deemed the dismissal was not at the initiative of the employer and, consequently, the applicant was not constructively dismissed. See Campbell v Mayjay Hotels Pty Ltd t/a Maroubra Junction Hotel [2012] FWA 163.

 

Suspension

A former employee asserted he was forced to resign after being suspended due to alleged breaches of his employer’s code of conduct. In dismissing the applicant’s appeal, a full bench of (the then) Fair Work Australia determined that suspension is not normally the basis for a claim of constructive dismissal. 

 

Future intention to resign 

A letter from an employee to an employer indicating an intention to resign in the future, and sent at a time when the employee was distressed and unwell, was held by (the then) Fair Work Australia not to be an effective notice of resignation.

Accordingly, the employer’s purported acceptance of the resignation was held to constitute a termination of employment at the employer’s initiative. See Marks v Melbourne Health [2011] FWA 4024. 

 

Resigned but continued to work 

After an angry discussion between an employee and her manager, the employee believed the employee had resigned. The employee continued to attend for work afterwards, in the belief that she had to work out the notice period for her dismissal. The employee was found not to have resigned because she did not demonstrate an intention not to be bound by her contract of employment. See Bender v Raplow Pty Ltd [2011] FWA 3407. 

 

Failure to pay wages

An employee gave notice of his resignation after having been paid under half of what he was owed in wages over a period of four months. This was held to be a forced resignation due to the conduct of his employer and constituted a dismissal. See Hobbs v Achilleus Taxation Pty Ltd ATF the Achilleus Taxation Trust; Achilleus Accounting Pty Ltd  ATF the Achilleus Accounting Trust [2012] FWA 2907.