Constructive dismissal

What is constructive dismissal

Constructive dismissal is when an employee resigns but the law treats the situation as if the employer dismissed them.

This can happen when:

• the employer’s behaviour makes it impossible for the employee to stay in that work environment, and
• the employee feels they have no choice but to resign. 

It does not just have to be one thing. It could be several things the employer has or has not done which are serious when added together.

Situations that can count as constructive dismissal

There are 3 situations where a resignation can be treated as constructive dismissal.

• The employer gives the employee a choice between resigning or being dismissed.
• The employer deliberately does things that put pressure on the employee to resign.
• The employer seriously breaches their employment or workplace obligations which gives the employee no choice but to resign.

Choice between resigning or being dismissed

This is when an employer tells an employee that they must resign or they will be dismissed.

Examples include when an employer tells an employee:

• to either accept a demotion or pay cut, or leave
• if they do not leave, the employer will start a disciplinary process
• they should resign before the employer fires them.

Deliberate pressure to resign

This is when an employer deliberately does things that put pressure on the employee to resign.

This can include behaviour from the employer such as:

• repeatedly making unreasonable demands
• increasing pressure on the employee and removing their support
• isolating or undermining the employee
• creating ongoing stress with the aim of forcing the employee to leave.

This situation can be harder to prove. The employee usually needs to show that the pressure was deliberate and aimed at causing them to resign.

Serious breaches make the employee resign

This is the most common type of constructive dismissal.

It can happen when:

• the employer seriously breaches their:
  • employment obligations (they do not meet the employment agreement), or
  • workplace obligations (legal duties), and
• that breach gave the employee no choice but to resign.

Examples include:

• bullying or harassment the employer has not properly addressed
• unsafe working conditions
• being forced to do work that is not lawful and reasonable
• the employee is paid incorrectly or late on a repetitive basis
• major changes to the employee's hours, pay or duties without agreement
• the employer does not deal with serious complaints
• serious breaches of the good faith obligations.

In this situation, it does not matter what the employer's intentions were. What matters is whether:

• the breach gave the employee no choice but to resign, and
• their actions were serious enough that the employee's resignation could have been expected (this is called 'reasonably foreseeable').

What’s not counted as constructive dismissal

If an employee resigns because of a difficult or unpleasant situation at work, it does not always mean it's constructive dismissal.

Examples of situations that are not considered constructive dismissal are:

• the employer asks the employee to do something they do not usually do, and the request was lawful and reasonable
• the employer was going through a fair and reasonable performance management process
• the employee had work-related stress but did not tell the employer, so the employer had no chance to help
• the employee agreed to resign because there were not in a fit emotional state to do their job, but changed their mind later
• the employee resigned even though the employer was trying to resolve problems with them and get them to stay.

The situation must be serious enough that resignation was the employee's only choice.

Before an employee resigns

Before an employee resigns, they should check their employment agreement to see what it says about resolving problems.

Employees should:

• raise their concerns with their employer in writing
• give the employer a reasonable chance to fix the problem, and
• keep records of what's happened.

If the employer could have fixed the problem but was not given the opportunity, the resignation may not be seen as constructive dismissal.

If it is not safe or practical for the employee to raise their concerns, it could be reasonable for them to resign without doing this.

Who else employees can raise their concerns with

If the employee's manager or employer is the person they are having the problem with, the employee could raise their concerns with:

• another manager
• human resources
• their union
• a lawyer, or
• an advocate.

Keep records of what's happened

In a constructive dismissal situation, employees must show that the employer’s actions left them with no choice but to resign.

This means it’s important to keep records of any conversations, what happened and what has been done about it.

How employers can reduce the risk of constructive dismissal

Employers can reduce the risk of an employee feeling like they were constructively dismissed by:

• following any relevant processes in the employment agreement
• communicating clearly and early with the employee
• addressing the employee's concerns and complaints quickly
• following fair and reasonable processes
• consulting with the employee properly before making changes.

Fair process

Good faith

If an employee believes they were constructively dismissed

Constructive dismissal is a type of unjustified dismissal. If an employee believes they have been constructively dismissed, they can raise a personal grievance for:

• unjustified dismissal, or
• unjustified disadvantage that relates to dismissal.

A personal grievance:

• is an action an employee can take against a current or former employer, and
• is raised when there is an employment issue that cannot be resolved.

Employees will need to raise a personal grievance within a certain timeframe.

We recommend employees seek legal advice before they raise a personal grievance.

Personal grievances