Constructive dismissal

by The Findlaw Team

Constructive dismissal is not resignation, and employees who feel that they have been forced to resign may have personal grievance options available to them.

Examples of constructive dismissal include where:

  • An employer gives an employee a choice between resigning or their employment being terminated;
  • An employer has followed a course of conduct with the deliberate and dominant purpose of coercing an employee to resign; or
  • A breach of duty by the employer leads an employee to resign.

When deciding if the employer has committed a breach of duty, the court will look at the circumstances surrounding a resignation. If it can be shown there has been a breach by the employer, the court will consider whether this was serious enough for the employer to reasonably anticipate that the employee would not be prepared to work under those circumstances. In other words, was there a substantial risk of resignation given the nature of the breach?

Constructive dismissal personal grievances claims are generally less likely to succeed than an unjustified dismissal claim, mostly because the aggrieved employee needs to prove that their resignation was, in fact, a dismissal.

An analysis from the Employers and Manufacturers Association published in August 2012 showed that only 31% of constructive dismissal claims in 2011 were determined in favour of the employee.

Constructive dismissal cases

Test for constructive dismissal

In Green v Schering-Plough Animal Health Ltd [1999] 2 ERNZ 733, the Employment Court held that there were two branches to the test for constructive dismissal.

The first branch was one of causation. First of all, it is necessary to ask whether the employee’s resignation had been caused by anything the employer did. If the employer’s actions did cause the employee to resign, it is necessary to ask whether the employer’s actions were a breach of the duty of fidelity owed to the employee.

The second branch was that it must be reasonably foreseeable that the breach of duty would lead to the resignation.

Option to resign or be demoted

In Weir v Fuji Xerox NZ Ltd [1998] 1 ERNZ 140, Weir had worked for the company since 1981. In May 1994, Weir was informed in a performance review of concerns about his management style. He was also told that there were concerns about his participation in the senior management team and his future with the company. His manager told him there was no future for him on the senior management team, and after asking what his options were, he was told he could either resign or elect to be demoted. The employee offered a third option of a change in his performance, but he was told this was not an option.

Weir felt that he had no option but to resign, and claimed constructive dismissal. The Employment Court held that the employer’s concerns about Weir’s performance were never dealt with in the agreed, documented, and fair manner provided for. He had been constructively dismissed.

Unsafe workplace

In Auckland etc Local Authorities Officers IUOW v Auckland Electric Power Board [1992] 1 ERNZ 87, the Employment Court held that the employer had failed to provide a safe workplace. This resulted in a constructive dismissal.

The employee was a meter reader who was repeatedly attacked by dogs, receiving injuries that needed medical attention. The employer had failed to follow up the employee’s complaints and did not provide an effective method for dealing with the hazard.

Assault on an employee

In Baggstrom v Cowan 3/12/97, FE McMorrin, WT108/97, Baggstrom was part of a logging gang. Following a disagreement about statutory holidays and payment, Baggstrom alleged that one member of management got him in a headlock and punched him in the face, after which he was assaulted by a foreman. Baggstrom formally resigned, but later claimed that the assaults amounted to an actual or constructive dismissal.

This matter went to the Employment Tribunal, who decided that Baggstrom had resigned. However, since the employer, in allowing his foreman to assault an employee, committed a fundamental breach of the employment contract, Baggstrom’s resignation amounted to a constructive dismissal. The employer was unable to justify the dismissal by alleging that the applicant was a stirrer or that he provoked the assault. Baggstrom was awarded compensation.



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