What is a Constructive Dismissal?

Constructive dismissal claims often follow a resignation where the employee claims they were forced to resign or had no option but to resign.  If an employee claims that they were constructively dismissed then the onus is on them to establish they have been dismissed.

There are various kinds of pressure that can turn a resignation into a dismissal.  These can include the classic “resign or you will be fired” ultimatum, deliberate conduct to force a resignation and a breach of duty leading to a resignation.

Deliberate conduct might include such things as asking an employee to look for other employment or setting out to make the employee so uncomfortable in the role with the aim of getting them to resign.

A breach of duty leading to a resignation could include failing to pay the employee, failing to provide a safe workplace, failing to provide appropriate work for the employee, changing the hours of work in breach of the terms of employment or insisting on a new agreement being signed which disadvantages the employee (these are only examples and the possible causes will be many and varied).

The causes of resignation can be built up over time until there is a “final straw” which triggers the resignation.  The final straw does not have to be as serious as the earlier steps but it does have to be a breach of duty and not be of a trivial nature.

The test is but for the employer’s conduct the employee would not have resigned.  If the employer conducts itself in a way that is designed or likely to damage or destroy the trust and confidence between the employee and employer then that will amount to constructive dismissal if it causes the resignation and the resignation is reasonably foreseeable the employee would likely resign.

If the actions that lead to the resignation come from other employees and not the employer then it will not be a constructive dismissal e.g. if an employee resigns due to bullying by co-workers that is not the employer’s behaviour.  However, if the employee complained to the employer about the bullying and the employer failed to deal with the situation or was dismissive of the employee’s concerns without a proper investigation that could amount to a constructive dismissal.

If the resignation is held to be a constructive dismissal then the dismissal will be unjustified as the employer will have failed to carry out a fair process to dismiss.

An employee who resigns during a disciplinary process might be able to claim constructive dismissal if the necessary behaviour of the employer exists e.g. an ultimatum to resign, deliberate conduct to force a resignation or a breach of process that leads the employee to resign.

An employer can take the heat out of a threatened constructive dismissal by addressing the employee’s concerns through a fair investigation of the employee’s allegations and reaching a conclusion a reasonable employer could make in the circumstances.

Alan Knowsley
Employment Lawyer
Wellington