When a Resignation Turns into Unfair (Constructive) Dismissal

One of your employees has resigned and now they’re accusing you of unfair dismissal! Why?

When your employee resigns, beware. There may be reasons behind their resignation that you are not aware of and a claim for ‘constructive dismissal’ may be on the horizon. 

Generally, constructive dismissal occurs when the employer ignores or violates the contract of employment, creating an environment that the employee reasonably finds intolerable or untenable.

Constructive dismissal is among a number of legal protections workers have against wrongful or unfair dismissal by unscrupulous employers and for justifiable reasons however, ethical employers can also unwittingly leave themselves open to such claims when they don’t handle resignations properly.

The Act describes constructive dismissal as ‘termination at the initiative of the employer.’ A pretty vague definition that, in real terms, means employer-induced resignation

Let’s break it down into a couple of real-world scenarios…

Scenario 1 – Failure to Act Quickly

A full-time employee of 4 years, Glennis, has come to you with a formal complaint of workplace bullying and harassment against her full-time co-worker of 3 years, Nathan. You accept the letter, of course, but you find the complaint trivial and, given that you are extremely busy, you put it to the bottom of your priority list. You reason that, surely, these two adults can resolve their differences without your intervention. After all, you and Nathan have developed a good relationship over the past 3 years, and you trust that he would never be one to bully or harass another.

Three weeks go by and the work is piling up on your desk, the letter of complaint is probably buried somewhere at the bottom. You roll your eyes in frustration as Glennis approaches your office door with another letter, only this one is different. Glennis hands you her letter of resignation which explains that she cannot continue to work in the environment that you have created by not dealing with the complaint she brought to you weeks ago.

Ok, you’re sad to see Glennis go, but you’re also secretly relieved that you don’t have to deal with her complaint and launch a workplace investigation. No Glennis, no complaint - you don’t have to worry about a thing, right? Wrong!

Glennis feels aggrieved that your inaction has left her with no option other than to resign and now she’s out of work and looking for compensation. Glennis has a lawyer friend who encourages her to lodge an application of unfair dismissal against you. You will soon be contacted by the Fair Work Commission, having to attend concilliations and possibly formal hearings. 

Ok so all you need to do to avoid this outcome is to investigate complaints promptly right? That’s a good start, but there’s more to consider. This brings us to the next scenario…

Scenario 2 – The Half-Hearted Investigation

Glennis has come to you with her letter of complaint against Nathan. You realise it’s important to investigate but you’re pretty time poor.

You conduct an investigation of sorts but you don’t interview all of the witnesses and you fail to consider crucial email evidence, reasoning that as long you’re seen to be doing something, that’s all that matters. You conclude that there has been no workplace bullying and that no further action should be taken. Job done, time to move on, right? Wrong!

Glennis finds out that you haven’t made thorough enquiries and concludes that the investigation was a whitewash. She feels dejected, believing that you aren’t prepared to tackle the problem and you just want to sweep it under the carpet.

Glennis resigns and that lawyer friend of hers advises that she file for unfair dismissal. A case for constructive dismissal is made on the basis that you didn’t follow fair process and therefore failed to adequately resolve the problem, making ongoing employment untenable for Glennis.

 

The moral of this story:

  • ALWAYS deal with complaints in a timely manner.
  • Conduct a thorough and procedurally fair investigation before making your determinations.
  • Make sure both parties understand the reason for your findings and the investigative process you undertook.
  • Always look for ways to assist unhappy employees. Mediation or coaching is sometimes a good option for workers not getting along.
  • Glennis might still resign if she doesn’t like the outcome, but at least you’ll be able to demonstrate you did everything possible to get to the bottom of the issues and create a viable working environment.

Other examples of circumstances which could be constructive dismissal:

  • An employer changes shifts or relocates an employee so that attending work becomes unviable.
  • A reduction in hours so that the employment becomes unviable.
  • A change in duties or job description so as to make employment unviable.
  • Acceptance of a ‘heat of the moment’ resignation.
  • A forced resignation whereby an employer gives an ultimatum – resign or be dismissed.

General guidelines for Combating Potential Constructive Dismissal Claims:

Conduct an exit interview: Ask the employee to detail the reasons behind their resignation. Ask whether there is anything that can be done to change their mind? There is no harm in asking whether the employee is leaving because of unsafe or untenable working conditions or workplace bullying. And, of course, if they tell you there are problems, you should be addressing them to the best of your ability.

Prepare a mutual separation agreement: to be signed by the employee prior to their departure. The agreement should state that the employee is leaving of their own accord and that they have been given the opportunity to openly and honestly discuss their reasons for leaving and have not raised any objections in relation to their employment as a reason for leaving.

MANAGING CHANGE

What happens when you have to make significant changes to an employee’s working conditions for operational reasons? Below are some tips for avoiding constructive dismissal claims under such circumstances:

Effective change management is important for preventing constructive dismissal claims. When an employee is subjected to major changes in their working conditions such as a transfer or redeployment, the employee should be given adequate time to understand and consider the changes before they come into effect. If the employee objects to the change, the options include:

  • attempting to negotiate modifications to the employment change to try and resolve employee objections.
  • if applicable, concede the role is made redundant by the change; confirm the employee’s wish not to be redeployed and retrench the employee.
  • maintain the position that the employer has the right to make the change unilaterally and be willing to dismiss the employee for disobedience (and defend any ensuing wrongful dismissal claim if necessary); or
  • reach a confidential mutual separation agreement with the employee (which of course is an option that can follow (a)-(c) above).

Of course, it is always recommended that you seek legal advice before taking any of the above actions.

About Synergy Workplace Investigations. Synergy is a specialist agency focused on conducting code of conduct investigations across Australia and New Zealand since 2012.

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