Constructive dismissal is a situation where an employee resigns as a result of improper conduct by the employer.  The employee’s resignation must arise from some breach of the employer’s duties and must be a reasonable decision in the circumstances.

Those situations fall into three broad categories:

  • Where an employer gives an employee a choice between resigning or being dismissed;
  • Where an employer has followed a course of conduct with the deliberate and dominant purpose of coercing an employee to resign; or
  • Where a breach of duty by the employer causes an employee to resign.  (For example, where an employer fails to pay an employee his or her agreed remuneration and demonstrates an intention to continue this breach.)
When is it reasonable for an employee to resign and claim constructive dismissal?

If the employee’s resignation is not reasonably foreseeable or is a disproportionate response, a claim of constructive dismissal will fail. A lot depends on the facts of the situation.

If the constructive dismissal falls within the second or third category above, the employee should in most cases have put the employer on notice about how the employee saw the problem and given the employer a chance to remedy the situation before the employee resigned.

For example:

  • A person taking offence at an ill-judged but innocent remark probably could not seize on it as a reason to resign and claim constructive dismissal, but a person who had been subjected to repeated verbal abuse and complained about it might be justified in doing so;
  • A person unhappy about being assigned a task falling within their usual duties could not use this as a reason to resign and claim constructive dismissal; a person who had been maliciously assigned unpleasant or unproductive tasks might be justified in doing so;
  • If there is a genuine disagreement between parties as to their rights, based on reasonable grounds, the parties need to give employment relationship problem resolution processes a chance, rather than the employee simply resigning.
  • A resignation to avoid an upcoming performance management process or disciplinary meeting is unlikely to be grounds for a constructive dismissal claim, unless the process is a clear abuse of the employer’s powers or undertaken for an improper purpose;
  • A person unhappy about not receiving a discretionary bonus could not claim constructive dismissal, whereas a person who had their hours of work and remuneration significantly varied without consultation may be able to do so.

In some situations an employer’s actions may justify a personal grievance for unjustified disadvantage, but not justify a claim of constructive dismissal.

Workplace bullying

If an employer is responsible for an employee being bullied to the point of resignation, this may be a constructive dismissal.  For further information, see “Workplace Bullying” in the Toolkit.

The perils of exiting the “Problem Employee”

Occasionally, claims of constructive dismissal arise from bungled efforts by an employer to negotiate the exit of a “problem employee”.  If negotiations break down, the employee may claim the employer “followed a course of conduct with the deliberate and dominant purpose of coercing an employee to resign”.

Exit discussions must be handled very carefully and with legal advice.  For further information, see “Removing a Problem Employee” on the Toolkit.

Remedies available

An employee who has been constructively dismissed may raise a personal grievance for unjustified dismissal and claim for lost remuneration and for humiliation, loss of dignity, and injury to feelings.

The grievance must be raised within 90 days beginning on the date on which the action giving rise to the grievance occurred or first came to the attention of the employee.  Because many constructive dismissal cases involve the cumulative effect of actions occurring over long periods of time, this 90 day limitation period can assume critical importance.  If left too late, the employee may find themselves without an actionable claim.

What Bartlett Law can do for you
  • Advise on how to address allegations of constructive dismissal;
  • Assist employees who believe they have been constructively dismissed;
  • Raise and/or defend personal grievance claims;
  • Assist with the mediation and facilitation of employment relationship problems;
  • Represent you in the Employment Relations Authority and the Employment Court.

Contact us for more information.