Constructive dismissal - recent developments

Anthony Drake, Senior Associate | June 2003

The Concise Oxford Dictionary defines constructive dismissal as "the changing of an employee's job with the aim of forcing resignation".

The actions of the employer may not amount to a breach of an express term of the employment agreement sufficient to amount to a repudiation of the agreement.

Instead, there may be a course of conduct that, considered as a whole, causes the resignation of the employee.

What constitutes constructive dismissal?

In the leading case of Auckland Shop Employees Union v Woolworths (NZ) Ltd (1985), the Court of Appeal identified three categories of constructive dismissal, namely:

• where an employer gives an employee the option of resigning or being dismissed;
  
  
• where an employer has followed a course of conduct with the deliberate and dominant purpose of coercing an employee to resign; or
  
  
• where a breach of duty by the employer leads an employee to resign.

The conduct behind the complaint must constitute a breach by the employer of a contractual term or a breach of duty on the part of the employer.

The breach must be so serious that the employee cannot reasonably be expected to continue the contractual arrangement.

In another recent case, Wilkinson v Recall Total Information Management (2002), the Employment Relations Authority said there can be a constructive dismissal if notice is given and there is then a delay between the conduct of the employer (constituting the breach) and the resignation of the employee.

In Wilkinson, the employee gave one month's notice of resignation which the Authority considered was an appropriate delay while the employee waited to see whether the matter would be resolved in an acceptable manner by negotiated departure or a different reporting structure. The Authority also held that, in a constructive dismissal setting, the law does not require a worker to depart immediately.

Generally, claims of constructive dismissal are notoriously difficult for employees to establish as the onus of proof rests with the employee to establish that the dismissal was unjustified - in contrast with claims for unjustified dismissal where the onus is on the employer to prove that a decision to dismiss was justified.

Workplace culture

In a recent Employment Court decision, Harrod v DMG World Media (2002), the Court examined the issue of workplace culture.

The Court said constructive dismissal is wider than a situation where an employee resigns from their employment in circumstances where their resignation has been forced or initiated by their employer.

The Court had "no difficulty in accepting that it can consist of creating an atmosphere in which an employment is unlikely to continue or continue for very long".

In Harrod, the employee had been moved to a workstation that was inadequate and unsuitable for a hard-working and successful employee. The employee claimed that management had created a culture of fear and distrust in the workplace.

The Court considered whether this culture could form the basis of a claim that the employer had adopted a course of conduct with the deliberate and dominant purpose of forcing an employee to resign (the second head of constructive dismissal identified in Auckland Shop Employees Union case).

In order to establish the second category, the employee needed to show that the employer's conduct was calculated to destroy or seriously damage the relationship of trust and confidence.

The employee claimed on the basis of the "insidious nature of the Manager's attitude". This claim was not, however, borne out by the facts.

The Court took the view that the manner in which the workstation was moved left a lot to be desired but did not give rise to a constructive dismissal. According to the Chief Judge:

"Employees, as human beings, are entitled to their human dignity and it is often as not some indignity offered by an employer to an employee that will result in a resignation and a subsequent claim that it was a constructive dismissal."

In the end, the Court found that the impact on the employee was as severe as it turned out to be due to the plaintiff's then rapidly deteriorating state of mental health.

The relocation in itself was not so serious as to entitle the plaintiff to resign and to call the resignation a dismissal.

Conclusion

This recent case illustrates that not every situation in which an employee feels disadvantaged will give rise to a successful claim for constructive dismissal.

It does, however, signal that employers should be aware of the need to take employee concerns seriously and respond to them appropriately.

Advice and information

Bell Gully's Employment Team can advise you on all types of employment issues, including constructive dismissal.
Contact the team at the numbers below for more information.