Unjustified Constructive Dismissal: Don’t Resign

I’ve been reluctant about writing about the personal grievance of unjustified constructive dismissal, because it’s such a significant topic, and one which is very fact specific.

However, I’ve had a number of enquiries lately, and I decided: it’s time.

… Alright, let’s get to it …

The Court of Appeal has confirmed that there are three categories of constructive dismissal:

• Where the employer gives the employee a choice between resigning and being fired;
• Where the employer embarks on a course of conduct with the purpose of coercing the employer to resign; and/or
• Where the employer’s breach of duty leads the employee to resign.

This may seem simple, however, there’s a significant body of case law around the unjustified constructive dismissal, and it’s important that you realise at the outset that success rates for this grievance at the Employment Relations Authority are sitting at about 50%: meaning that it is a riskier personal grievance to pursue than many others.

I have to admit: I am very risk adverse in this area. I am mindful of the risk to an employee if they are unsuccessful. I’m known for being brutally honest with employees about the risks of progressing, and the weaker areas of their claim. While the law is the law, representatives may differ in how we interpret the law, and the level of risk we associate with such claims.

Category 1: Resign or I’ll fire you

The first category of constructive dismissal is where the employer gives the employee a choice between resigning and being fired. This may seem simple, however, it is very rare that these conversations occur in writing, which means there is a significant evidential hurdle.

Resign or I’ll fire you

If an employer has pulled you aside, and provided an ultimatum between resigning or being fired, I would always recommend that you try to get evidence of this conversation. This could be a simple text message or email where you reference the conversation. Some conversation starters include:

• I’ve been thinking about our conversation, I really can’t afford to either resign or be terminated, however, it would help this decision if you could tell me how much annual leave I have owing and how much I’d be paid for my notice period?
• I was wondering if it’s possible to talk more about the reasons for possible termination of employment before I make a decision about whether I resign?
• I know you said you wanted an answer about whether I’d resign or be terminated this afternoon, but is it OK if I make a decision by tomorrow afternoon? I just need some time to really think about this.

The purpose of this type of conversation is to get a response that will confirm that you were given an ultimatum between resigning or being dismissed, and if there is a misunderstanding, your employer has the immediate opportunity to remedy this.

Without prejudice correspondence

There is a second, more niche, instance of where an employer provides an employee an ultimatum between resigning or being terminated: that is where the employer has provided a ‘without prejudice’ letter with an offer for the employee’s resignation.

Usually, without prejudice conversations are privileged and confidential, however, this only applies where the conversation is used for a lawful purpose. In accordance with section 57 of the Evidence Act 2006, the conversation must be made in connection to settle a dispute between the parties. This means there must be an existing employment relationship problem between the parties.

It is important to note here that alleged concerns about performance or behaviour are not considered a “dispute,” especially in circumstances where the employee hasn’t been provided an opportunity to state whether they agree or disagree with the allegations. For an existing dispute to exist between the parties, there must be a significant difference between the views of the parties about a matter that concerns them both.

Without this dispute, the without prejudice correspondence was not made lawfully, and it is commonly held that unlawful conduct can never attract protection. This means that it is admissible in law, and can be used as the basis of a personal grievance.

The pragmatic reality is tough: the employer has now fictitiously made an employment relationship problem, and the employer has destroyed the trust and confidence in the relationship, resulting in a situation where it is usually untenable to return. The only thing you can do is to use that without prejudice correspondence to negotiate a much higher settlement. You’ll need a strong backbone if you want to continue in employment following this type of correspondence: however, it is possible if that’s what you desire.

… This is a situation that personally irks me, because it is the most obvious example of the power imbalance in the employment relationship, and it’s a problem that the law has failed to adequately address …

Category 2: Coercion

The second category of constructive dismissal is where an employer embarks on a course of conduct with the purpose of coercing the employee to resign. This is one of the more rarely-seen categories of constructive dismissal, as it requires the employee to show evidence of the employer’s intention.

An employee raising a personal grievance under this category will be required to show that the employer was acting in such a way, with a clear intention, of coercing the employee to resign. In all honesty, many employees in this situation would have more success arguing their constructive dismissal under the third category.

Category 3: Breach of duty

The third category of constructive dismissal is where the employer’s breach of duty leads the employee to resign. However, there has been a significant amount of development on this category, and the law can now be summarised as requiring:

• Breach: A significant breach of duty
• Causation: This breach of duty must be the cause of the employee’s resignation
• Resignation: The employee must have had literally no other option but to resign
• Foreseeability: It must have been reasonably foreseeable that the employee would resign

Each requirement is outlined below.

Significant breach of duty

Firstly, the employee must show a significant breach of duty of the employer. This could be a significant breach of the employment agreement, a significant breach of minimum entitlements, a significant breach of the Employment Relations Act 2000 or otherwise.

This breach must be significant, and usually sustained: it’s not likely to be enough if an employer has underpaid you once. The law expects that employment relationships are robust enough to handle smaller breaches of duty: that’s not to say there aren’t remedies available in law, but that you may not be able to justify a resignation over that breach. In the case of a one-off underpayment, an employee could pursue this to the Employment Relations Authority while remaining employed

In terms of resignations following bullying and harassment, it’s important to know that a personal grievance is against the company and not against the person who is bullying / harassing you. This means that you legally need to give the company an opportunity to remedy the situation: in other words, you are required to formally raise a concern or complaint. In fact, most successful personal grievances for unjustified constructive dismissal are due to an employer’s failure to investigate the concerns, rather than the bullying itself.

Caused the employee to resign

Secondly, the significant breach of duty must be the reason that the employee is resigning. Usually, an employee can point to ‘the straw that broke the camel’s back,’ and can detail the exact moment they felt they had no other option but to resign.

However, if there has been no recent event, an employee will struggle to show that it was the breach that caused their resignation. This will cause some questions, and you should expect vigorous cross-examination if you reach the Employment Relations Authority.

The law doesn’t expect people to walk away without alternative employment, and there is some leeway for this, however, many employees will struggle with their claim if it’s clear that the reason that they resigned was not due to any breach of duty, but rather to move on to better opportunities.

The employee had literally no other option but to resign

Thirdly, the employee must have had literally no other option but to resign. This is where most employee’s fail with their unjustified constructive dismissal claim. The Authority will consider all other options available to the employee, and whether it was reasonable to expect the employee to take that action prior to resigning. For example, I would ask you:

• Have you made a formal complaint about the behaviour that is leading you to want to resign?
• Have you given your employer the opportunity to remedy the behaviour?
• If you’re still employed, could you seek legal representation to assist you with this process, and potentially progress matters to mediation?

Remember that the obligation of good faith works both ways: it requires that both parties are active and constructive in maintaining the employment relationship. This means that sometimes you’ll have to have difficult conversations about your employment conditions, to provide the employer an opportunity to remedy the situation. If you don’t think you can have those conversations, you may want to have a support person or representative assist you throughout the process: you’ll be amazed at what a good representative can achieve.

In either situation, it’s a good idea to really think about the options you have open to you, and you should only resign if you feel you literally have no other option.

(Optional) It was reasonably foreseeable that the employee would resign

The law isn’t clear about whether the foreseeability test is required, however, it is always prudent to consider this element of constructive dismissal. It can be helpful to ask an independent third-party what they think of the situation, and if they say: “No wonder you resigned,” then it could be worth seeking legal advice about progressing your personal grievance. In essence, this test is that it would be reasonably foreseeable to an objective person that you would resign in the circumstances.

Conclusion

Employment law is not a lucrative area of law, and it is almost always the case that remaining in employment is the better ‘remedy’ than resigning. This is why, if possible, I urge that employees reconsider their resignations and consider engaging skilled representation to assist them in repairing the employment relationship and in remedying the core issues.

There will always be cases where an employee has no other option but to resign, however, this will always come with risks: even setting aside the legal risks, there are pragmatic risks associated with being unemployed and receiving no income. This is another reason why it’s beneficial to engage representation before you resign: even if resignation is inevitable, we can often assist you in negotiating an exit package, which would avoid the time, costs, stress and uncertainty of litigation.

If you’re still employed, and you’re reading this, please don’t resign before seeking legal advice. There are many representatives who will offer free preliminary advice, myself included, and who are happy to discuss whether there are other options available to you.

If you’ve already resigned, consider what is written in this blog post, and decide whether you want to pursue a personal grievance for unjustified constructive dismissal. If in doubt, reach out, and I’ll provide some honest advice.

In either situation, due to the uncertainty of unjustified constructive dismissals, I usually recommend that employees seek the advice from at least two different representatives. In the first instance, you don’t want to be part of the 50% who are unsuccessful in their claims, and in the second, you don’t want to miss out on an opportunity if you receive advice from a risk adverse representative.

Image credit: Yan Krukov