How to avoid a constructive dismissal claim

What is a constructive dismissal?

In simple terms, a constructive dismissal is a forced resignation. This dismissal typically arises because of an employer’s actions in the workplace, leaving the employee with no choice but to resign. Although it may seem like the employee voluntarily resigned, this dismissal is not a reflection of the employee’s own accord. If you are an employer, it is essential for you to understand constructive dismissal because it can form part of an unfair dismissal claim with the Fair Work Commission (FWC). 

Circumstances that cause a constructive dismissal

Constructive dismissal will typically arise in circumstances where the working conditions caused the employee to resign in the heat of the moment or under extreme pressure. 

An employer may be found to have constructively dismissed the employee if: 

• They take the resignation as real and voluntary without giving the employee reasonable time to reflect; or 
• The employee withdraws their resignation, and the employer refuses to take back the employee. 

If the employer takes this resignation as real and voluntary, they may be found to have constructively dismissed the employee,  The employee may also be found to have been constructively dismissed if, after the employee has taken back his or her resignation in the heat of the moment, the employer refuses to take back the employee. 

Examples of Constructive Dismissal 

A constructive dismissal can arise in situations which forces employees to voluntarily resign from the company. They may include but are not limited to:

1. Being bullied, and becoming fed up with the situation;
2. Working conditions become unbearable;
3. No longer being paid by the employer, who also refuses to pay the employee for work done; or 
4. Having new family arrangements, and the employer refuses to be flexible. 

How can you prevent a constructive dismissal? 

Firstly, it is important that you attempt to address any problems the employee was experiencing and try to resolve their problem. As an employer, you should: 

• Give the employee a chance to explain their reasons for deciding to resign;
• Give the employee the opportunity to retract their resignation; and
• Take steps to investigate these issues that they have been experiencing at work. 

I received a constructive dismissal claim, what can I do? 

Where  an employee voluntarily resigns, they have 21 days to lodge an unfair dismissal with the Fair Work Commission (FWC). Once lodged, the FWC will forward the employer a copy of this application, and you have 7 days to file a written response to the application. In this response, you can include reasons why you believe the dismissal is not unfair. 

If appropriate, you can make objections the application on the grounds that: 

• It was not lodged by the employee within 21 days of their resignation;
• The unfair dismissal laws do not apply;
• The employee is not eligible; or 
• The application has no prospects of success. 

Alternatively, you can lodge a jurisdictional objection if you believe the dismissed employee does not fall within the Commission’s jurisdiction. Once you have responded to the application with relevant supporting documents, you must send your response documents to the FWC and directly to the employee. 

The FWC will then arrange a conciliation between you and the employee, with a FWC conciliator present. This process is usually conducted over the phone, and gives both parties an opportunity to resolve the matter. On most occasions, issues between the employer and employee are resolved at conciliation. 

Unsuccessful Conciliation, what happens next?

If the issues are not resolved through the conciliation process, you will then have a conference or hearing at the FWC before a Commissioner who will decide whether the dismissal was unfair. 

During this conference, the Commissioner will consider a variety of factors, and they include:

• Whether you dismissed the employee;
• Whether the dismissal was harsh, unjust or unreasonable;
• If you are a small business owner, whether the dismissal was consistent with the Small Business Fair Dismissal COde; and 
• Whether the dismissal was a case of genuine redundancy. 

Key Points

• Constructive dismissal may arise where the employee resigns due to the actions of an employer. 
• To avoid this type of dismissal, it is important you take steps to investigate the problem,  find solutions whilst giving the employee reasonable time and chance to reflect their intention to resign. 
• Where the employee files a constructive dismissal claim against you, it is important to ensure you respond to the application within 7 days, and attend the conciliation. 
• If unsuccessful at conciliation, the Commissioner at the FWC will decide whether the dismissal was fair or not. 

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