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Gloves off. Crown rules that Constructive Dismissal can bring down Employer!

The termination of an employment contract can give rise to a litany of litigation, which can lead to an employer’s conduct being carefully scrutinized in the public arena.

Constructive Dismissal and forced resignations are often used colloquially. Understanding what is involved in these applications and how they are dealt with can assist employers and employees to make informed choices about what to do and what not to do when the employment relationship ends.

Employees sometimes feel that they have to leave their job due to workplace issues. This includes poor treatment, bullying, safety concerns or their employer’s failure to pay entitlements. Legal avenues available to employees to tackle this behavior can diminish after they resign. However if an employee can establish that their employer’s actions actually caused them to them resign a Constructive Dismissal application may be available.

Constructive Dismissal is a cause of action, which can be utilized by an employee who has resigned and issues an Unfair Dismissal action or a General Protections application under the Fair Work Act (2009) Cth. The Fair Work Act stipulates that employees are required to issue proceedings involving Unfair Dismissal or a General Protections within 21 days of being terminated. Time is of the essence in the Fair Work Commission (FWC), matters move quickly and parties need to be on the front foot.

Essentially Constructive Dismissal applications involve an employee arguing that their employer’s conduct was so bad that they had no other choice but to resign.

The primary issue for the FWC in Constructive Dismissal matters is whether an employee can establish that they resigned at the ‘initiative of the employer’. These applications entail employees arguing that they were forced to leave their job by their employer’s actions, which had the effect of forcing them out.

Constructive Dismissal can be difficult to establish, the outcome of any Constructive Dismissal application will depend on the circumstances of the case and the strength of the evidence relied upon.

Employees should seek legal advice about their options under awards and enterprise agreements before deciding what application is suitable in their circumstances and take a strategic approach to any litigation to maximize results.

Over the last few years, a number of cases have highlighted the complexities of these applications and the various approaches taken by commissioners when deciding these applications.

A) Mohazab v Dick Smith Electronics

Mohazab was an employee of Dick Smith Electronics. He issued proceedings after his manager quizzed him about stock in the store going missing and told him that he would face a police investigation if he did not resign on the spot. Mohazab was then given a letter of resignation, which his employer had prepared in advance. He then complied with his employers’ request to sign the pre-prepared resignation letter.

Mohazab issued proceedings and argued his termination was unlawful. Dick Smith Electronics disputed these claims and asserted that Mohazab was not forced to resign and that he made this decision freely of his own volition because he was worried about being subjected to a police investigation.

After examining the evidence, the Court decided that Mohazab was terminated at the initiative of the employer and that he had no choice but to resign. The Court considered that the employee would have not ended the employment relationship if he had not been told him that he would be subjected to a police investigation if he did not resign.  

B) O’Meara v Stanley Works Pty Ltd

The Court outlined the legal test to be followed when deciding constructive dismissal cases and stated that there needed to be ‘some action on the part of the employer which is intended to either bring the employment to an end or has the probable result of bringing the employment relationship to an end’.

There have been several pivotal FWC cases in the last few years highlighting that the findings will turn on the facts of the case and the surrounding circumstances.

C) Kylie Bruce v Fingal Glen Pty Ltd T/A Comfort Inn Adelaide Riveriera (Fingal Glen)

Proceedings were issued by Kylie Bruce, an employee, who resigned from working as a receptionist for her employer. In this matter the employee claimed that her employer’s actions of regularly paying her wages late and not paying superannuation placed her under so much stress that she was forced to resign.

Prior to issuing proceedings, the employee had made complaints to senior management about issues with the payment of her wages. Nevertheless, the issues remained unresolved and the employee was owed more than $4,000 in superannuation at the time of the hearing.

The FWC criticised the employers’ lack of professionalism in not paying entitlements and found that ‘it is clear that a failure on the part of an employer to pay the employee can amount to termination at the initiative of the employer, or for that matter, can be described as a course of conduct engaged in by the employer that forced an employee to resign’.

The Commissioner was ultimately not satisfied that the employee had been Constructively Dismissed. The Commissioner was of the view resigning was not the employee’s only option and she had other avenues available to her to address the issues she experienced.

The FWC considered that the employee could have reported the matter to the Fair Work Ombudsman or taken action under the award and used these mechanisms to deal with the matter as opposed to resigning.

The employee’s resignation was seen as  ‘perfectly reasonable’ in light of her experiences, however the employer’s actions were not considered to be of the ‘magnitude’ that it forced the resignation.

Ms. Bruce attempted to appeal the decision, however a full bench of the FWC was satisfied that the Senior Deputy President had applied the law correctly and did not allow the appeal.

The Commission did not find employees were constructively dismissed in the two other recent cases:

  1. The Applicant had been asked to work out his notice period after being made redundant. The Applicant left his workplace and went off on sick leave, his access to the organization’s IT system was then terminated. After his sick leave the employee was given the option of coming back to work. The Commission held that the removal of the employee’s access to IT systems did not force the employee to resign as other options to continue his employment had been afforded to him which he did not take up.
  2. An employee went on sick leave and made an application for workers compensation, after she had been asked to come to a meeting to discuss allegations about her conduct.  The employee made an application for workers compensation, however was not successful. She then resigned five months later and issued proceedings and argued that she had been constructively dismissed. The Commission rejected her application.

D) Rind v Australian Institute of Superannuation Trustees – the Commission was satisfied that an employee had been Constructively Dismissed. The employee had returned from parental leave and asked to work part-time. The employer refused. The employee’s request was in accordance with her enterprise agreement and the company who had been doing the work part-time was not asked to undertake the work full-time since they refused the employee’s request.

The Commissioner considered that the employer’s refusal was unreasonable in this matter and he was “satisfied that the company engaged in a course of conduct that justified Ms. Rind treating the employment at an end because there was an unreasonable refusal to perform the company’s obligations to Ms. Rind under the terms of the Enterprise Agreement”.

Reference: “Constructive dismissal: Resignation brought about by the conduct of the employer”.

These cases demonstrate that the termination of an employment contract can be a complex task whereby an employer’s action or inaction can give rise to liability.

We recommend that you seek expert legal advice from one of our lawyers at the earliest opportunity to protect your interests.

In essence, get legal advice early and get it often. After all, sometimes you need to be able to fix your own crown before others tear it down.

This article has been prepared for information purposes only and is not legal advice. For legal advice regarding your specific circumstances, please contact WR Law directly on (03) 5499 6131 or by email at admin@wrlaw.com.au