Constructive Dismissal – A high test for an employee to satisfy

22 May 2024

Employees who have an employment relationship problem with their employer, which could include a dispute with the employer or an allegation of bullying or harassment by colleagues, have the right to raise a personal grievance. In some cases, the employee may raise a claim of “constructive dismissal”.

What is Constructive Dismissal?

A constructive dismissal claim usually arises where the employee was not actually dismissed by the employer, but the employee believes they were ‘forced’ to resign from their employment because of a hostile work environment. Some examples include:

An employee claiming their employer failed to provide a safe workplace, which could include a claim the employee is being subjected to bullying and harassment by colleagues in the workplace, and the employee considers the employer’s actions to address the concerns raised have been insufficient or ineffective.

The employer presenting the employee with an ultimatum in relation to a performance or conduct issue – either to resign or to be dismissed from their employment.

The employer breaching the employee’s employment agreement or acting unfairly towards the employee, to the extent the employee believes their employment can’t continue, such as the employer imposing a unilateral variation to employee’s terms of employment, or unilaterally altering an employee’s agreed hours of work.

The employer deliberately acting in some other way to cause the employee to resign.

The key point is that if an employee raises a claim of constructive dismissal, the onus of proof rests with the employee; and the bar is relatively high.

An example of a successful claim

In Caldeira v LCNZ Ponsonby Ltd [2024] NZERA 255 the Employment Relations Authority held that the employer had constructively dismissed the employee after failing to provide them with sufficient flexibility and support during a difficult pregnancy. The employer was ordered to pay the employee $20,000 in compensation for hurt, humiliation and loss of dignity.

The employee had repeatedly raised concerns with their employer about the need for flexible start and finish times due to pregnancy-related health issues. Not only were the employee’s requests ignored, but she was suddenly met by an abrupt reduction in her days of work without consultation, which the employee believed was a form of punishment as a result of her pregnancy difficulties.

Summary

The onus of proof rests with the employee; and the bar is relatively high.

It is not necessary to prove that the employer wanted the employee to resign. The question is whether the employer’s conduct caused the employee to resign, and whether that resignation was reasonably foreseeable in the circumstances.

To avoid constructive dismissal claims, it is important to respond promptly and considerately to any claim from an employee that they feel they are being forced out. Take such claims seriously and investigate them thoroughly and make appropriate decisions based on the outcome of those investigations.

This doesn’t mean employers should resile from raising performance or conduct concerns, but such processes must be conducted with an open mind to avoid claims the process was unfair, and/or the employer pre-determined the outcome. Particular care must be taken with “without prejudice” discussions.

For more information contact: Tony Teesdale 021 920 323, Justine O’Connell 021 920 410, Michelle Battersby 021 993 735, or Esther Cohen-Goh 021 178 4111