An employee was awarded over $27,000 compensation after the Fair Work Commission (FWC) found that she was nearly always either paid late or not paid at all. The unpaid wages eventually exceeded $9,000. The FWC found that this left her with no option other than to resign, and therefore she was constructively dismissed.
Facts of case
After three months as an unpaid intern, the employee was offered a paid one-year contract that was extended for a second year. In that time, she was only paid on time once. When she finally resigned, she was owed 12 weeks’ pay, of which one amount was five months overdue.
She complained many times before finally contacting the Fair Work Ombudsman (FWO), which also found that she was being paid less than her award rate. The employer then adjusted the rate after contact from the FWO, but did not correct the previous shortfalls.
Finally the employee told management that she would resign in two weeks’ time if all underpayments and non-payments were not rectified. Management praised her work and promised to pay her, but failed to do so, so she resigned. She claimed she was forced to resign in order to remove herself from “an exploitive and unlawful [work] situation”.
When the employee lodged a claim with the FWC, the employer made a payment of $4,000 but not the rest of what it owed her.
The FWC found that the employee was paid less than her award classification rate, and seldom paid on time. As she had frequently alerted management to the situation, involved the FWO and given the employer a final opportunity to rectify the underpayment before resigning, the FWC said that she had no other option but to resign. This therefore amounted to constructive dismissal, although the FWC emphasised that not every case of underpayment would entitle an employee to claim constructive dismissal. It described the employer’s conduct as “unacceptable and unlawful”, which occurred over almost the entire term of her employment.
The FWC also found that the employee’s job should have put her under a higher award classification, thus also entitling her to a higher pay rate. Also, treating her initially as an “unpaid intern” was probably illegal – she should have been paid for that work.
The employer’s various excuses for underpaying or paying late were described by the FWC as vague and lacking evidence.
Decision
For constructive dismissal, the FWC awarded compensation of $27,425 less tax and plus superannuation. This was almost triple the total amount she was underpaid.
What this means for employers
Successful constructive dismissal cases are rare. But in this case, the employee tried several ways to get the employer to pay her correctly over almost her entire term of employment, and the employer failed to do so. This, said the FWC, met the constructive dismissal test of giving her no option other than to resign.
Constructive dismissal requires conduct by the employer to be deliberate to the extent of forcing an employee to “resign” because he/she had no other realistic course of action. It then usually becomes the equivalent of unfair dismissal.