When an employee’s resignation becomes a dismissal


Receiving a long-awaited resignation from a troublesome employee may, at first blush, look like an employer’s dream come true.

But all too quickly the dream can become a nightmare when that same employee subsequently raises a personal grievance (PG) for constructive dismissal.

A bewildered employer could be forgiven for thinking, “Surely this is not a dismissal, it was the employee who resigned and I have the resignation letter to prove it!” However, constructive dismissal claims should not be confused with unjustified dismissal claims, the latter being where the employer did dismiss the employee, but the employee claims that the dismissal was unfair.

A constructive dismissal, simply defined, is where an employee resigns but claims the conduct of the employer left them no other option. There are three main categories of constructive dismissal.

The first is the most obvious, where an employee is told to resign, or they will be facing dismissal. This might happen when the employee is facing disciplinary action and the employer decides to save everyone all a bit of time and stress by just asking the employee to resign, to avoid an inevitable dismissal.

The second is where the employee claims the employer embarked on a course of conduct with the deliberate and dominant purpose of coercing an employee to resign, such as setting unachievable goals and/or unacceptable work conditions, or claiming there are issues with the employee’s performance that are not true.

The third category is where the employer has breached the employer’s duties. The duty might be one or more of the expressed duties set out in the individual employment agreement (IEA) or an implied duty, such as acting in good faith or acting in a fair and reasonable manner.

A constructive dismissal grievance (like the majority of PGs) must be raised within 90 calendar days of the employment terminating, although the period for claiming underpayments such as wage arrears and Minimum Wage and Holiday Act payments, are claimable for six years following the act or omission coming to the employee’s attention.

The onus for proving on the balance of probability (meaning what’s more likely than not) that the employee was constructively dismissed falls firmly on the employee, and the threshold for demonstrating that the employee was left with no other option but to resign is high. For that reason, it is one of the more difficult PGs for an employee to successfully pursue.

But let’s face it, if you can avoid a PG, even one with slim prospects of success, why wouldn’t you? Employment law is very much a case of an ounce of prevention being worth a pound of cure.

So here are some tips as to what an employer can do to try and avoid constructive dismissal claims.

Never offer an employee the option between resignation or dismissal, not even if you think it is “off the record” or “without prejudice” as it is likely it will be neither, and this proposal can then be used as evidence in litigation. There is also the danger that by making such a proposal you are showing predetermination of a disciplinary outcome, before the disciplinary process has been completed. That is another big no-no;

Be rigorous with your documentation. If an employee is underperforming, inform them of this in writing, at the time the issues arise, and let them know you have concerns. If the performance does not improve then the employer needs to propose a formal performance improvement plan (PIP) so the concerns are very clearly spelled out and documented, and the improvement the employer needs to see is also clearly conveyed, along with allowing a reasonable period of time for the employee to improve;

Ensure that prior to taking any actions such as changing an employee’s duties, hours or pay, that you have thoroughly checked the IEA and that you can in fact lawfully do what you are doing. IEAs are not something that the parties sign and then just gets thrown in the bottom drawer, never to be seen again. IEAs are basically workplace wedding vows between an employer and an employee, containing the agreed rules of  how the relationship will work. The IEA should be checked every time there is some unfavourable or significant action that an employer is proposing to embark on. If the IEA allows changes to hours and duties, for example, it will usually state that, but will also often prescribe the process such as ‘by mutual agreement in writing’ or ‘following consultation with the employee’.

If you fail to do that, then you have breached the IEA, which could give rise to the third category of constructive dismissal; and Do not engage in any course of conduct designed to coerce the employee to resign. You may think your secret plan is only in your head, but the cumulative actions that an employee can reasonably prove occurred could very much turn that ‘secret plan’ into a concrete blueprint in the eyes of the Employment Relations Authority.

If an employer acts as a fair and reasonable employer, and the documentation shows that, it will certainly make successfully pursuing a constructive dismissal claim even more difficult than it already is for an employee.


About Author

Erin Burke

Employment Lawyer and Director at Practica Legal Email: erin@practicalegal.co.nz phone: 027 459 3375