Resignation: When is it really a dismissal?

Introduction

Many people think that the termination of employment is a simple process, whereby an employee either resigns or where they are dismissed by an employer. However, there is another option.

‘Constructive dismissal’ is another way in which an employee’s employment can be terminated and this is a much more complex issue.

This article explores when an employee’s resignation may be deemed as a dismissal, with a particular focus on constructive dismissal.

Constructive Dismissal Defined

Constructive dismissal refers to a situation where an employee resigns from their position due to a breach of the employment contract by the employer.

Unlike a conventional resignation, where the decision to leave is voluntary, constructive dismissal arises when the employer’s actions or behaviour creates an untenable working environment, essentially forcing the employee to resign.

One example of a situation which can lead to a constructive dismissal is when there have been significant changes in terms of employment.

While it is normal for there to be minor changes in any job, if an employer unilaterally makes substantial changes to the terms of employment without the employee’s agreement – such as a significant reduction in salary, altered job responsibilities, or relocation without consultation – it may constitute constructive dismissal.

Other examples of situations which may constitute constructive dismissal are outlined below.

Workplace Harassment or Discrimination

Sustained harassment, discrimination, or a hostile work environment can force an employee to resign. If the employer is aware of the situation and these circumstances but fails, to address or mitigate such issues, the employee may have grounds for claiming constructive dismissal.

Breach of Implied Duties

Employers have implied duties, such as providing a safe work environment, respecting an employee’s privacy, and acting fairly. A consistent breach of these duties may give rise to a claim of constructive dismissal.

Unfair Disciplinary Action

Unfair or excessive disciplinary actions, particularly when it is not in line with established company policies, can be grounds for constructive dismissal. This includes arbitrary terminations or severe penalties for minor infractions.

Rights of the Employee

When an employee believes they have been constructively dismissed, they may choose to treat the situation as an unfair dismissal and pursue legal recourse.

Employment legislation provides protections against unfair dismissal, outlining specific criteria and procedures for filing a claim. These laws are designed to ensure that employees are treated fairly and reasonably in the termination of their employment.

Successful claims of unfair dismissal may result in remedies such as compensation or reinstatement.

Compensation aims to repay the employee for losses suffered due to the dismissal, while reinstatement involves restoring the employee to their former position. Reinstatement may not always be the most suitable option, giving consideration to the circumstances in which the unfair dismissal occurred.

Assessing Employer’s Conduct

Determining whether a resignation is truly a dismissal involves assessing the employer’s conduct against established legal principles.

The legal standard applied in determining constructive dismissal involves both subjective factors (how the employee perceived the situation) and objective factors (whether a reasonable person in the same circumstances would consider the conduct to be a breach).

Breach of Contract

The crux of constructive dismissal lies in the breach of the employment contract. It is not sufficient that there has been a minor breach of the contract, there must be a breach of an essential term so that the contract is no longer tenable.

An employee must demonstrate that the employer’s actions or omissions amounted to a fundamental breach of the contract, leaving them no reasonable option but to resign.

The employer’s intent and knowledge of the impact of their actions plays a crucial role here. If the employer is aware – or should reasonably be aware – that their conduct would lead to the employee’s resignation, it strengthens the case for constructive dismissal.

The employee’s response to the alleged breach is also assessed. If the employee resigned immediately without attempting to address the issue or explore alternatives, it may impact the viability of the constructive dismissal claim.

Conclusion

There is a very fine line between what may be classed as a resignation versus what may be classed as a constructive dismissal. Navigating this requires a deep understanding of employment law as well as the factors and specific circumstances surrounding termination.

If you as an employee are facing challenging workplace conditions, you must carefully assess the circumstances of your resignation.

Such factors to consider include whether there have been significant changes in your employment terms, whether there is workplace harassment or unfair disciplinary proceedings and whether you have made any attempt to address the issues or explore alternatives, where possible.

It is also important that as an employee, you understand your entitlements under unfair dismissal laws so you can pursue remedies for constructive dismissal and hold employers accountable for their breach of the employment contract.

As an employer, you should be mindful and exercise caution in your conduct to avoid potential legal consequences and maintain a fair and respectful work environment.

Employment

Employees v Contractors: What is best for you and your business?

It is more important than ever to ensure that the relationship between you and your employees or your contractors is comprehensively covered. In 2022 alone, there have been two High Court cases delivering judgements on the importance of declaring an individual’s employment status under written contracts and agreements.   What...

Read more

Small Business

Can an employee’s knowledge be attributed to the company?

Can an employee’s knowledge be attributed to the company? Commonwealth Bank of Australia v Kojic [2016] FCAFC 186 considered whether the conduct of two bank employees could be ‘aggregated’ to bring a finding of unconscionable conduct on the part of the bank under the (previous) Trade Practices Act 1974. The...

Read more