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You may have had a situation where an employee resigns and then comes back to the business, arguing that your business forced them to resign. Forced resignation, also known as ‘constructive dismissal’ is when an employee has no real choice but to resign due to conduct engaged in by an employer. This article will outline:

  • the definition of forced resignation; 
  • examples of forced resignation;
  • the differences between forced resignation and voluntary resignation; and
  • how employers can avoid this type of situation.

Definition of Forced Resignation

The Fair Work Act 2009 defines a dismissal as either:

  • employment terminated on the employer’s initiative; or
  • the employee has resigned but was forced to do so because of their employer’s conduct (forced resignation).

Forced resignation falls under the second limb of the definition and usually occurs where the:

  • employee feels they have no real choice but to resign due to the conduct of the employer; or
  • employer engaged in certain conduct intending to bring the employment to an end (or this probable result).

The employee bears the onus of proving that they did not voluntarily resign and the employer forced their resignation. It is a fine line between an employee resigning on their own initiative and resigning based on conduct that leaves them no choice but to resign. The word ‘forced’ indicates the relatively high threshold that the employee needs to establish to prove they had no other choice but to resign because of the actions of their employer.

If an employee can prove that your business forced them to resign, you will face the same risks as if had you directly terminated the employee’s employment. This includes the employee making an unfair dismissal claim.

Case Law Examples

The application of this definition of forced resignation has to be considered on a case by case basis. Some case examples include when an employee:

  1. was distressed and unwell and handed their resignation letter to their employer about a future resignation. As such, this was not effective notice of resignation. When the employer accepted the resignation, this was held to constitute the employer terminating to employment;
  2. was paid half their wages for the previous four months so decided to give his notice of resignation. This did amount to a forced resignation due to the conduct of the employer;
  3. who was subject to a disciplinary investigation resigned rather than attending a disciplinary meeting to discuss his alleged misconduct. This did not amount to a forced resignation by the employer, as it was a voluntary resignation; or
  4. resigned based on supervisory requirements that were implemented for a performance plan that had commenced. This did not amount to a forced resignation by the employer.

Differences Between Forced Resignation and a Voluntary Resignation

Whether an employee’s employment is terminated because of a forced resignation or whether they voluntarily resign has a large impact on various employment entitlements. Some entitlements include:

  • whether the employee can bring an unfair dismissal claim; and
  • long service leave entitlements.

For an employee to bring an unfair dismissal claim, they must have been dismissed. Ordinarily, if an employee voluntarily resigns, they have not been dismissed and cannot bring a claim. On the other hand, if any employee is forced to resign, it could amount to a dismissal, and they may be able to bring an unfair dismissal claim.

In New South Wales, if an employee leaves employment after having completed between five and 10 years of service due to their employer terminating them, other than for serious misconduct, the employee will get paid a pro-rated amount of long service leave. If the employee voluntarily resigns, they do not receive the long service leave entitlement, unless the employee resigns as a result of:

  • illness;
  • incapacity; or 
  • domestic or other pressing necessity.

While this is not a comprehensive list of the ramifications of employee dismissal, these are the most common points. They become important when determining your liability in terms of employee entitlements post-employment.

As an employer, you need to be aware that your conduct with your employees can amount to additional risks on termination. Simply because an employee resigns does not mean there are no risk to your business. You should be open and clear with your communication with your employees at all times.

Key Takeaways

Your conduct as an employer can place employees in a position where they have no choice but to resign. You must understand the implications of forced resignation and the impact it can have in regard to exposure and risk to the business. It is essential to obtain advice on how to terminate employees if you are looking to pursue that avenue. You must ensure you have everything correct procedurally and make sure there is a clear line of communication between you and your employees. If you have any questions about managing your employees, contact LegalVision’s employment lawyers on 1300 544 755 or fill out the form on this page.

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