Failure to pay wages will be grounds for constructive dismissal

In the ordinary course an employee who resigns after not being paid for a material time will be entitled to treat the employer’s conduct as the repudiation of the employment relationship and thus a constructive dismissal.

“Was Mr White dismissed?

[14] A central question in the present matter is whether Mr White was dismissed for the purposes of Part 3-2 of the Act. Mr Prabhakar submitted that there was no dismissal, because Mr White resigned. However, the Act recognises that in some cases, an employee will have no choice but to resign because of the actions of the employer.

[15] In order to bring an unfair dismissal application, a person must first have been dismissed. Section 386 states that a person has been ‘dismissed’ if the person’s employment has been terminated ‘on the employer’s initiative’ (s 386(1)(a)), or the person has resigned from his or her employment but was ‘forced to do so because of conduct, or a course of conduct, engaged in by his or her employer’ (s 386(1)(b)).

[16] A persistent and unjustified failure by an employer to pay salary is a repudiation of the contract of employment. Such a repudiation can amount to termination ‘on the employer’s initiative’ for the purpose of s 386(1)(a). A termination of employment will be ‘on the employer’s initiative’ if an ‘act of the employer results directly or consequentially in the termination’ (see Khayam v Navitas English Pty Ltd [2017] FWCFB 4082 at [37]), or the employer’s actions are the ‘principal contributing factor’ which lead to the termination of the employment relationship (see Mohazab v Dick Smith Electronics Pty Ltd (No 2) (1995) 62 IR 200 at 205).

[17] In the present case, Mr White did not elect to accept repudiation of the contract until 6 January 2020, although he might well have done so earlier. Mr White chose to persevere with the employment relationship and continued to work until 10 January 2020, when his resignation took effect. Although it was Mr White’s decision to elect to accept repudiation, it was nonetheless the employer’s conduct in failing to pay him that brought the relationship to an end. In my view Mr White’s employment was terminated on the employer’s initiative.

[18] If there were any doubt about this, it is quite clear that the termination of Mr White’s employment would in any event have been a forced resignation for the purpose of s 386(1)(b). In Bupa Aged Care Australia Pty Ltd v Tavassoli [2017] FWCFB 3941, a Full Bench of the Commission considered the authorities on resignation and their application to s 386 of the Act. At [47], the Full Bench stated that, in considering whether a resignation is ‘forced’ for the purposes of s 386(1)(b), the test is ‘whether the employer engaged in the conduct with the intention of bringing the employment to an end or whether termination of the employment was the probable result of the employer’s conduct such that the employee had no effective or real choice but to resign.’

[19] Based on Mr Prabhakar’s evidence, I accept that the company did not intend to bring about the end of the employment by not paying Mr White’s salary. Clearly the company was in financial difficulty. However, regardless of the company’s intention, it must surely be the case that the ‘probable result’ of a failure to pay an employee’s salary for an eight-week period is that the employee will have no choice but to resign. An employee cannot work for nothing. Mr White’s resignation message to Mr Prabhakar made clear that he needed urgently to find other employment so as to be able to pay bills and ease the ‘enormous financial strain’ he was under.

[20] I conclude that Mr White was dismissed for the purposes of s 386(1). He was terminated on the initiative of the employer, or alternatively was forced to resign because of the conduct of the employer.”

White v Superior Facilities