Constructive dismissal is the non-voluntary resignation of an employee in response to something their employer has done. It is important for you, as an employer, to understand constructive dismissal. This is because it can form part of an unfair dismissal claim with the Fair Work Commission (FWC). This article will discuss the circumstances in which constructive dismissal may arise.

When is a Resignation Involuntary?

It is not always evident that an employee has resigned involuntarily. It is therefore essential for you, as an employer, to review the events leading up to an employee’s resignation. For example, if an employee resigns in the ‘heat of the moment’, they may argue that they felt they had no other option but to resign.

You should hold an exit interview to figure out why an employee has resigned and whether it was involuntary. If you find that the resignation was constructive and involuntary, you may be able to alleviate your employee’s concerns before they make a claim.

What are Some Examples of Constructive Dismissal?

These four examples follow James (the employee) and Sophie (the employer) at a fictional business, Designer Designs. In each of these scenarios, James can make an unfair dismissal claim with the FWC.

Example 1

Sophie accuses James of bullying the trainee, Stephen. Sophie approaches James and gives him the option of resigning or facing an investigation.

Example 2

James is being bullied at work by Trent. James speaks to Sophie about Trent’s behaviour. Trent is a good worker, so Sophie turns a blind eye to what has happened. James decides to resign because he feels he has no other option and is fed up with the way he has been treated.

Example 3

James receives his wage once a month. Sophie has hit a rough patch with Designer Designs, so she failed to pay James for the work he completed that month. James lets it slide in the hope he will be paid soon. Two months pass, and Sophie has still not paid James.

He decides to bring this up with Sophie, who explains the business is not in a financial position to pay his wage. James has to seek work elsewhere and resigns from Designer Designs.

Example 4

James has a written employment agreement with Designer Designs. He and his wife, Sally, have a 6-year-old daughter. Usually, Sally does the school pick up and drop off. But now, she has to go interstate to visit her sick mother and may not be back for a few months.

James approaches Sophie to see if he can pick up his daughter from school, then work at home in the evening. Sophie rejects his suggestion, saying he needs to be at work until 5:30pm every day. James does not think Sophie is flexible. James is forced to resign so he can look after his daughter.

Prevention of Constructive Dismissals

To avoid situations in which constructive dismissal arises, you should assist your employees with any problems they have. You should also give them the opportunity to retract their resignation and investigate the issues they have flagged.

Constructive Dismissal and the FWC

When an employee resigns, they have 21 days to lodge an unfair dismissal claim with the FWC. You will receive a copy of their application. You then have seven days to file a written response to the application. Here, you can explain why you believe the dismissal is not unfair.

Where appropriate, you can also object to the application on the basis that:

  • the employee lodged the application after 21 days from their resignation;
  • the employee is not covered by unfair dismissal laws or is not eligible; or
  • the application has no prospects of success.

After you have responded to the application, the FWC will arrange a conciliation between you and the employee. A FWC conciliator will also be present. Conciliation is an informal process that takes place over the phone. It gives the employer and employee the opportunity to resolve the matter themselves. Most cases are resolved at conciliation.

If you do not resolve the matter at conciliation, you will proceed to a conference or hearing before a Commissioner at the FWC. The Commissioner will then decide whether the dismissal was unfair.

There are a number of issues a Commissioner has to consider when deciding whether there has been an unfair dismissal. These are:

  • whether you dismissed the employee;
  • whether the dismissal was harsh, unjust or unreasonable;
  • if you are a small business, whether the dismissal was consistent with the Small Business Fair Dismissal Code; and
  • whether the dismissal was a case of genuine redundancy.

Key Takeaways

An employee can claim there has been a constructive dismissal when making an unfair dismissal claim with the FWC. If you have received a claim from an employee or the FWC, you should make sure you respond to it promptly. If you have questions or need assistance responding to a claim, contact LegalVision’s employment lawyers on 1300 544 755 or fill out the form on this page.

Allison Hendriks
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