Employers need to take care when making changes to an employee’s contract of employment as it may give rise to allegations of constructive dismissal.
Section 386(1)(b) of the Fair Work Act 2009 (Act) provides that a person has been dismissed if they were forced to resign from their employment because of conduct, or a course of conduct, by their employer. This is commonly known as constructive dismissal.
The Act reflects the common law concept of constructive dismissal, allowing for a finding that an employee was dismissed in situations where:
- The employer expressly asks the employee to resign or face a threatened or impending dismissal, or;
- The employer’s conduct may leave the employee feeling that he or she has no reasonable choice but to resign.
View on Dundas Lawyers Youtube Channel – Constructive Dismissal
Examples of conduct which could give rise to constructive dismissal
Importantly the definition of “conduct” includes both an act and a failure to act. Unacceptable conduct of the employer may be an unauthorised variation to employment conditions, such as:
- Repeated failure to pay wages;
- A pay-cut;
- Demotion;
- Change of working hours;
- Relocation; or
- Reducing the responsibilities and duties of an employee who returned from maternity leave.
It may also be unacceptable personal treatment of the employee such as:
- Harassment by a fellow worker that the employer has unreasonably failed to prevent or punish; or
- Continued failure to investigate allegations of bullying or to take appropriate steps to protect the employee from the bullying.
Not a separate legal claim
Constructive dismissal is not a separate claim, but is an argument put as part of an unfair dismissal or a general protections (adverse action) claim.
In lodging a claim, an employee must prove on the balance of probabilities that he or she did not leave their employment voluntarily but rather was forced to leave because of the employer’s conduct.
It is a high threshold to prove the employer’s conduct fundamentally damaged the employment relationship to the extent that what the employer did, or failed to do, left the employee with no other option but to resign.
Importantly, the employer’s conduct must involve a significant breach of the employment contract and must be the principal contributing factor leading to the employee’s resignation.
In summary, constructive dismissal cases are rarely straight-forward with each case assessed on its own facts. It is recommended that employers and employees alike seek legal advice whether submitting or defending a claim.
Links and further references
Cases
Australian Hearing v Peary (2009) 185 IR 359
O’Meara v Stanley Works Pty Ltd [2006] AIRCFB PR973462 (11 August 2006)
Mohazbad v Dick Smith Electronics [1995] IRCA 272
Legislation
Further information
If you are an employer or a senior executive and need any assistance regarding a constructive dismissal claim, contact us for a confidential and obligation-free discussion:
Malcolm Burrows B.Bus.,MBA.,LL.B.,LL.M.,MQLS.
Legal Practice Director
T: +61 7 3221 0013 (preferred)
M: +61 419 726 535
E: mburrows@dundaslawyers.com.au
Disclaimer
This article contains general commentary only. You should not rely on the commentary as legal advice. Specific legal advice should be obtained to ascertain how the law applies to your particular circumstance.
Related insights about employment law for employers
-
Electronic service of legal documents
The decision in Conveyor & General Engineering Pty Ltd v Basetec Services Pty Ltd [2014] QSC 30 examined validity of service of documents via email and Dropbox. Find out judgement and “take-aways” to help navigate complex legal process of document service.
-
Enterprise agreements – key considerations for employers
Enterprise bargaining is an intricate process. The key obligations of employers, from notification to voting, lodging, and approval, are explained. This article examines pre-bargaining, union representation, and good faith bargaining, as well as relevant cases and legislation.
-
Why employers must follow correct processes
Employers may be surprised to learn that a valid dismissal can still be deemed unfair by the Fair Work Commission if procedural fairness and natural justice requirements weren’t met.
-
Restraint of trade & commercial contracts – a systemic approach
This article provides an invaluable overview of restraint of trade clauses (ROTs). It examines the enforceability of ROTs, their test of reasonableness, and the role of the Court in determining their reasonableness, providing a valuable guide for those wishing to draft and enforce them.
-
New anti-bullying legislation
The Fair Work Amendment Bill 2013 (Cth) was passed, introducing anti-bullying measures to protect workers. Employers must take steps to prevent bullying and face fines for contravening orders.
-
Superannuation changes – are you prepared?
The Australian Government has introduced significant changes to superannuation, with gradual increases in the compulsory superannuation rate set to impact both employers and employees. Starting in July 2013, employers will be required to contribute more to their employees’ superannuation funds, with the rate rising to 12% by 2019. This article breaks down the key changes,…
-
Employee Share Scheme (ESS) offering through options
Offering employees shares or options to acquire securities can be a great way to reward, retain, and entice them. Discover the different types of employee share schemes, their associated tax implications, the reporting and withholding obligations employers must satisfy.
-
Federal Court implies a new duty in employment contracts
The landmark Commonwealth Bank of Australia v Barker [2014] HCA 32 ruling has changed the way employers must manage their employees. Find out how this Federal Court decision could affect your business and what you need to do to ensure compliance.
-
Employee or contractor – impact on intellectual property
This article explores the legal implications of determining whether an individual is an employee or contractor. Learn how a multi-factor test can help to identify the correct status, and understand the potential impact on intellectual property.
