Understanding Constructive Dismissal

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We’ve heard of employers letting their employees go for unfair reasons. At this point, most business owners know this conduct is against employment laws and they could face legal consequences for dismissing employees without due cause.

However, the Fair Work Act 2009 (Fair Work Act) defines the term dismissed in two ways.

The first is when an employer terminates an employee on their own. The second is when an employee is forced to resign due to the conduct of their employer.

Oftentimes, the second definition of dismissal gets overlooked. In legal terms, it’s known as constructive dismissal.

It’s crucial for employers to be aware of constructive dismissal so they know what to avoid in order to uphold the rights of their employees in the workplace.

What Is Constructive Dismissal?

Constructive dismissal is when an employee willingly resigns. However, they feel compelled to do so due to the behaviour of the employer. This is often described as an employer ‘forcing’ an employee to resign, which means the employee had little to no choice.

When an employee does so, they can still claim unfair dismissal under the Fair Work Act and demand remedies such as compensation.

What Does The Fair Work Act Say About Constructive Dismissal?

Section 386(1)(b) of the Fair Work Act clarifies that an employee can still claim that they were dismissed if their resignation was a result of conduct from the employer that left them with no choice.

Therefore, constructive dismissal is a violation of the Fair Work Act. If any employer is found to have engaged in it, they can be subject to legal consequences. In order for this to occur, an employee will need to bring forward a complaint which is then investigated by the relevant authorities and deliberated on by the courts.

How To Establish Constructive Dismissal

It’s up to the legal system to determine whether constructive dismissal has occurred in a particular scenario.

The test for constructive dismissal was established in Bupa Aged Care Australia Pty Ltd v Tavassoli. In order to determine whether unfair dismissal has occurred, the following must be determined:

The conduct of the employer demonstrates they had an intention to cause the employment to end
The employer’s conduct left the employee no choice but to resign

Essentially, if the employer had not behaved the way they did, the employee would still be employed by them.

Bullying And Harassment In The Workplace

Constructive dismissal often stems from bullying and harassment in the workplace.

Bullying and harassment occurs when a person is constantly picked on, harmed, intimidated, hurt or coerced.

When an employee is facing conduct that is harming them either mentally or physically and their employer does nothing to protect them, they will more than likely have no choice but to resign.

As an employer, it is your duty under workplace health and safety obligations to make sure you facilitate a healthy work environment for all your staff. Bullying and harassment is a clear violation of your duties under workplace health and safety. Even if you are not personally harming the victim, you can still be held liable under vicarious liability.

Vicarious liability occurs when an employer is responsible for the acts of their employees if it cannot be determined they took reasonable steps to prevent the employee from engaging in something inappropriate.

Therefore, it’s extremely important to ensure your workplace is free from bullying and harassment.

Is Constructive Dismissal A Breach Of Your Employment Contract?

Constructive dismissal is likely to be considered a breach of the Employment Contract you have with your employees.

As we mentioned above, employers have a duty to provide their employees with a safe working environment. If an employee has been forced to resign, there’s a strong chance their employer has not fulfilled this obligation or another duty they have towards them.

Remember, employees have to demonstrate they had no choice but to resign, with the threshold being pretty high.

As a result, when it is proven that constructive dismissal had occurred, there’s likely to be strong evidence to suggest that the employer had violated their duties towards their employees in order to let such a situation occur.

Key Takeaways

As an employer, it’s important to build a strong relationship with your employees and always ensure they are receiving the correct treatment at work. Constructive dismissal is a huge step for an employee to take, and can be extremely damaging to a business’ culture and brand reputation. .

To summarise what we’ve discussed:

Constructive dismissal is when an employee has no choice but to resign due to the conduct of their employer
It is against the law, according to the Fair Work Act
In order to establish constructive dismissal, it must be shown the employer had the intention of causing the employment to end or their conduct forced the employee to resign
Bullying and harassment in the workplace can often lead to constructive dismissal
Constructive dismissal can be considered a breach of your employment contract with an employee

Get Expert Employment Law Advice

There are a number of legal matters employers need to be aware of. Employment is one of the most important areas, which is why it helps to talk to an employer that specialises in employment law.

At Sprintlaw, we can help you draw up the right contracts and answer your legal questions so you can be assured your business is legally compliant when it comes to your employment obligations.

If you would like a consultation on your options moving forward, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.

Sapna Goundan

Sapna has completed a Bachelor of Arts/Laws. Since graduating, she's worked primarily in the field of legal research and writing, and she now writes for Sprintlaw.

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