Managing Forced Resignation Under Fair Work in Australia

As an employer, you can encourage honest conversations about performance and culture. But there’s a clear line between a lawful resignation and a “forced resignation” (often called constructive dismissal) under the Fair Work framework.

Crossing that line can expose your business to unfair dismissal claims, reputational risk and unexpected cost.

In this guide, we’ll unpack what “forced resignation” means in Australia from an employer’s perspective, how to manage tricky performance or misconduct issues without pushing for resignation, and what to do if an employee claims you forced them to resign.

What Is ‘Forced Resignation’ Under Fair Work?

In Australia, a resignation is generally voluntary. However, if an employee resigns because of your conduct - for example, they felt they had no real choice but to leave - that resignation can be treated as a dismissal (often referred to as constructive dismissal).

Examples of conduct that might tip a resignation into constructive dismissal include:

• Threatening termination unless the employee resigns immediately.
• Unilaterally making significant adverse changes to core employment terms (e.g. drastic pay cuts or demotions without consultation or lawful basis).
• Creating or allowing a hostile work environment that leaves the employee with no reasonable alternative but to resign.
• Setting punitive or impossible requirements with the intention of forcing a departure.

If a tribunal finds the resignation was effectively at your initiative, the employee may pursue an unfair dismissal claim. Whether a dismissal was “harsh, unjust or unreasonable” is assessed by reference to the factors in section 387 of the Fair Work Act.

The takeaway for employers is simple: focus on fair process and genuine consultation. If resignation enters the discussion, it should be employee-led and clearly voluntary.

Can You Ask An Employee To Resign?

You can raise concerns about performance, conduct or culture. You can outline lawful options (e.g. performance improvement plans, redeployment where suitable, or termination following a fair process). But “asking for” a resignation is risky.

Where resignation is discussed, the safest approach is to make it clear that:

• No decision has been made about termination at that point.
• The employee has time to consider their position and seek independent advice.
• Any resignation would be entirely voluntary and in writing.

Never coerce, pressure or suggest that resignation is the only way to avoid embarrassment or a worse outcome. That kind of conversation is often cited as evidence of a forced resignation.

If you genuinely believe the role is no longer tenable, you should follow a fair, documented process instead of nudging toward a resignation. This reduces the risk of constructive dismissal arguments and aligns with the fairness criteria considered under section 387.

How Do You Manage Performance Or Misconduct Without Forcing A Resignation?

Good process protects your business and your people. Here’s a practical framework that keeps you on the right side of Fair Work obligations.

1) Set Clear Standards And Start Early

Make sure position descriptions, key performance indicators and workplace policies are clear and communicated. Early feedback and coaching can often resolve issues before they escalate.

2) Use A Structured Performance Process

For performance issues, run a fair performance improvement process. Give the employee clear examples, support, reasonable time to improve and regular check-ins. If the situation progresses to formal allegations, issue a fair and detailed show cause letter and invite a response before making decisions.

3) Investigate Misconduct Properly

Where misconduct is alleged, gather facts impartially and afford procedural fairness. In appropriate cases, you may consider standing down an employee pending investigation, particularly if there are health, safety, or integrity risks.

4) Probation Is A Tool - Not A Shortcut

During probation, you can exit staff more quickly if it isn’t the right fit. However, you still need to act lawfully and fairly. Make sure you understand the guardrails when terminating employment during probation, including notice and discrimination risks.

5) Make Informed Outcomes

If, after a fair process, you determine that termination is appropriate, communicate your decision, reasons and effective date clearly and in writing. Avoid language that suggests the employee “must resign” to avoid dismissal.

In some cases, it may be appropriate to offer alternatives, like a mutual separation deed, without pressure. A well-drafted separation can give both sides certainty about notice, payments, releases and return of property - but it should be truly optional.

What If An Employee Resigns And Alleges They Were Forced?

Allegations of constructive dismissal can be unsettling, especially if you’ve tried to manage things professionally. A calm, methodical response is key.

Step 1: Capture The Facts

Keep detailed records of meetings, letters, performance plans and decisions. Save emails and notes summarising conversations and timelines. Accurate documentation often becomes the difference-maker.

Step 2: Review Process Against Fairness Factors

Assess your process against the Fair Work test for unfair dismissal under section 387 (e.g. whether there was a valid reason, whether the employee was notified and had a chance to respond, and whether support was allowed). Identify any gaps and consider remedial steps where feasible.

Step 3: Consider A Commercial Resolution

Sometimes, a pragmatic solution (for example, a mutual separation deed or agreed reference wording) can resolve matters quickly and cost-effectively. If you discuss this, be careful not to imply threats or pressure - keep the option voluntary and give time for independent advice.

Step 4: Communicate Carefully

If the employee has already lodged a claim, follow your legal obligations and timeframes. Maintain a professional tone throughout, and ensure only designated people communicate on the matter to avoid mixed messages.

Notice, Final Pay And Entitlements When Someone Resigns

If a resignation is valid and accepted, you’ll need to handle notice and entitlements correctly. Getting the basics right reduces disputes and builds trust.

Notice Periods (Or Payment In Lieu)

Employees typically provide notice under their contract or applicable industrial instrument. You can sometimes choose to make a payment in lieu of notice and end employment earlier. Check the contract before making a call, and document any agreement.

Annual Leave And Other Balances

Accrued but unused annual leave must usually be paid out on termination. Understand your obligations around annual leave on resignation, including any loading if the award or agreement requires it.

Final Pay Timing And Contents

Ensure the final pay includes all owed amounts, such as wages up to the last day, accrued leave payouts and any agreed extras. This guide to calculating final pay is a helpful checklist while you reconcile entitlements.

Avoid unilateral deductions unless clearly permitted by law or a written agreement that meets strict requirements. Errors here can escalate conflict quickly.

How To Minimise The Risk Of Constructive Dismissal Claims

Building good processes upfront is the best way to avoid “forced resignation” situations later.

Invest In Clear Employment Contracts

Ensure contracts set out role expectations, probation, notice, confidentiality, intellectual property and grounds for termination. Clarity reduces disputes and guides decision-making when issues arise.

Keep Your Policies Current

Workplace policies (e.g. performance management, code of conduct, bullying and harassment) should be accessible, consistently applied and refreshed periodically. Managers should be trained to follow them.

Use Fair Processes Every Time

When concerns emerge, act early and proportionately. Use structured performance management, well-drafted show cause letters where necessary, and careful investigations for misconduct. Where risk justifies it, consider lawful standing down pending investigation.

Consider Garden Leave And Mutual Departures (Carefully)

In sensitive exits, garden leave can help protect clients, data and culture while avoiding pressure to resign. Where appropriate, a voluntary mutual separation deed can help both parties move forward with certainty.

Document Everything

Contemporaneous notes, agendas, action items and follow-up emails create a clear record that you acted reasonably. If a claim arises, you’ll be glad you kept thorough files.

Key Takeaways

• A “forced resignation” (constructive dismissal) can occur if your conduct leaves an employee with no real choice but to resign, exposing you to unfair dismissal claims.
• Fair, documented processes for performance and misconduct - including clear expectations, support and a right of response - are your best protection.
• Be cautious about discussing resignation; it should be employee-led and voluntary, not suggested as the only option.
• If a dispute arises, review your process against the fairness criteria in section 387 of the Fair Work Act and consider pragmatic, voluntary resolutions.
• Handle notice and entitlements correctly, including options for payment in lieu of notice, annual leave on resignation and accurate final pay.
• Proactive risk management - strong contracts, current policies, trained managers and consistent documentation - minimises constructive dismissal risk.

If you’d like a consultation about managing forced resignation risks under Fair Work or putting robust processes in place, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.