Constructive Dismissal Vs Unfair Dismissal

While the term ‘unfair dismissal’ is commonly recognized, ‘constructive dismissal’ remains less familiar to many. Unfair dismissal typically involves the termination of employment without lawful justification. On the other hand, constructive dismissal presents its own set of challenges for organizations, often overlooked due to its lesser-known nature.

Here’s how to make sure constructive dismissal does not become an issue in your organisation.

What is constructive dismissal?

Constructive dismissal, also referred to as constructive unfair dismissal, arises when an employee resigns because they believe they have no alternative. It occurs when circumstances within the workplace compel the employee to tender their resignation.

How does constructive dismissal differ from unfair dismissal?

An unfair dismissal claim may also comprise a constructive dismissal, so it is impossible to view the two as separate issues. Broadly speaking, however, constructive dismissal occurs when a person resigns of their own accord but only due to circumstances which forced them to tender their resignation. Unfair dismissal occurs when an individual’s employment is terminated but it was done so on grounds that are found to be unlawful.

Constructive dismissal may arise when an employer:

• threatens a worker with dismissal;
• engages in misconduct which puts a worker in an uncomfortable position or one which threatens their integrity;
• makes significant changes to the worker’s role or the workplace itself; or
• subjects an employee to baseless disciplinary action

The employee may feel compelled to resign, and this action could form the basis of a constructive dismissal claim.

Times where constructive dismissal might occur include:

• whilst the worker is experiencing bullying or harassment;
• in the heat of the moment during a tense interaction with a superior or colleague;
• during stressful periods where the employee has a significant workload or is under duress; and
• at times where there are other ‘forceful’ factors at play.

A forceful factor includes any experience in the workplace which can have a negative impact on an employee, such as a reduction in hours without prior warning or not being paid for time worked. Any poor conduct by an employer which could make an employee feel the need to resign may be classified as constructive dismissal.

If constructive dismissal forms part of an unfair dismissal claim the burden of proof will fall on the employee, meaning the employee must be able to prove that their employer intended for them to resign or that the employer believed it was probable that the working relationship would be brought to an end by the employee’s resignation.

What should employers do to avoid an unfair dismissal claim?

If an unfair dismissal claim is brought against an employer and constructive dismissal is alleged, the employer will be required to defend itself against the allegations.

To mitigate the risks, employers should establish clear grievance, bullying, and harassment policies outlining complaint procedures and investigation protocols.

Address systemic issues or grievances raised by employees promptly through thorough investigations and resolution attempts.

Provide necessary support to employees navigating workplace challenges and ensure adherence to employment laws.

In cases where the resignation is made in the heat of the moment, the employee should be given a cooling off period in which they can rescind their resignation.

Where an employee has cited that the reason for their resignation is due to a specific systemic issue or a grievance with a colleague or superior, employers should offer to investigate the issues to determine whether they can be resolved prior to accepting the employee’s resignation.

If you are an employer who needs assistance navigating employment laws around constructive dismissal our experienced employment lawyers in Cairns can provide guidance.