Constructive dismissal after employer stops paying employee’s salary...

The Employment Relations Authority has recently upheld an employee’s personal grievance claim of unjustified constructive dismissal and ordered the employer to pay $30,000.

The employee received a salary from the employer of $60,000 a year. She was paid her salary in monthly instalments of $5,000 as per her individual employment agreement.

The employee received her final salary payment on 31 May 2021, for the work she had done in May. However, she continued to work for the employer through to the end of September 2021.

When the employee realised that other employees were being paid and she was not, she asked her employer about her salary. The employer responded by insulting the employee and her standard of work, and refusing to pay her.

The employee considered that this meant she had been dismissed at the end of May 2021. She left the workplace and made a personal grievance claim of unjustified constructive dismissal to the Authority.

The Authority first had to determine whether the employee was actually an employee of the company and not a contractor.

When determining whether a person is an employee, the Authority will consider a number of factors. These factors include the intentions of the parties, the real nature of the relationship and the level of control the employer has over the person’s day-to-day work.

In this case, the Authority considered the fact that the employee had an individual employment agreement and was paid a salary by the employer. The employee had set hours and days of work, and was paid annual leave in accordance with the law.

The employer also controlled the day-to-day work that the employee did, as well as required her to invoice customers in the company’s name. No payments were made by customers to the employee’s account.

The Authority decided that these factors meant the real nature of the relationship was one of employment. The Authority then had to consider whether the employee had been unjustifiably constructively dismissed.

A constructive dismissal may occur when an employer has breached a duty and as a result an employee has resigned. The resignation must have been reasonably foreseeable from the employer’s actions.

One of an employer’s fundamental obligations is to pay an employee their wages. A failure to do so, especially without consultation, is a fundamental breach of the relationship of trust and confidence that an employer owes an employee.

The Authority decided that it was reasonable for the employee to assume that her employment had ended, given the employer had made it clear they did not intend to pay her. The employee was therefore unjustifiably constructively dismissed.

The employer was ordered to pay $20,000 in wage arrears, as well as $10,000 in compensation to the employee for the distress caused by the dismissal.

It is important to ensure that you are following the steps required to properly and fairly dismiss an employee. If you are confused about these obligations, it pays to seek advice from a professional with experience in the area.

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Alan Knowsley and Hunter Flanagan-Connors