Unfair dismissal; reduction of hours and constructive dismissal

As I posted yesterday, the issue of the relationship between the reduction of a casual employee’s hours and whether this can be regarded as a dismissal for the purposes of the Fair Work Act is complex. A closely related, but technically different concept, is the relationship between the reduction of work hours for an employee by the employer, whether permanent or casual, and the issue whether that can constitute a constructive dismissal. Here is the law explained.

“The Explanatory Memorandum to the Fair Work Bill 2008 states as follows in relation to this provision:

“Clause 386 – Meaning of dismissed

  1. This clause sets out the circumstances in which a person is taken to be dismissed. A person is dismissed if the person’s employment with his or her employer was terminated on the employer’s initiative. This is intended to capture case law relating to the meaning of ‘termination at the initiative of the employer’ (see, e.g., Mohazab v Dick Smith Electronics Pty Ltd (1995) 62 IR 200).
  2. Paragraph 386(1)(b) provides that a person has been dismissed if they resigned from their employment but were forced to do so because of conduct, or a course of conduct, engaged in by their employer. Conduct includes both an act and a failure to act (see the definition in clause 12).
  3. Paragraph 386(1)(b) is intended to reflect the common law concept of constructive dismissal, and allow for a finding that an employee was dismissed in the following situations:
  • where the employee is effectively instructed to resign by the employer in the face of a threatened or impending dismissal; or
  • where the employee quits their job in response to conduct by the employer which gives them no reasonable choice but to resign.”

[129] In Mohazab v Dick Smith Electronics Pty Ltd 24 the Industrial Relations Court of Australia was dealing with a case where an employee resigned his employment after being directed to do so or the police would be called. The Court did not consider the issues in that case solely within the paradigm that has been described as constructive dismissal. Rather the Court considered the meaning to be given to the term “termination at the initiative of the employer” and held that:

“…it is unnecessary and undesirable to endeavor to formulate an exhaustive description of what is termination at the initiative of the employer but plainly an important feature is that the act of the employer results directly or consequentially in the termination of employment and the employment relationship is not voluntarily left by the employee. That is, had the employer not taken the action it did, the employee would have remained in the employment relationship.” 25

[130] The Court went on to cite with approval the judgement of Wilcox CJ in APESMA v David Graphics Pty Ltd 26 where his Honour said:

“I agree with the proposition that termination may involve more than one action. But I think it necessary to ask oneself what was the critical action or what were the critical actions, that constituted a termination of the employment.” 27

[131] In relation to Mohazab a Full Bench of the Australian Industrial Relations Commission said in O’Meara v Stanley Works Pty Ltd 28:

“[23] In our view the full statement of reasons in Mohazab which we have set out together with the further explanation by Moore J in Rheinberger and the decisions of Full Benches of this Commission in Pawel and ABB Engineering require that there… be some action on the part of the employer which is either intended to bring the employment to an end or has the probable result of bringing the employment relationship to an end. It is not simply a question of whether “the act of the employer [resulted] directly or consequentially in the termination of the employment.” Decisions which adopt the shorter formulation of the reasons for decision should be treated with some caution as they may not give full weight to the decision in Mohazab. In determining whether a termination was at the initiative of the employer an objective analysis of the employer’s conduct is required to determine whether it was of such a nature that resignation was the probable result or that the appellant had no effective or real choice but to resign.”

[132] Section 386(1) covers a wide range of circumstances whereby the employment relationship is not left voluntarily by the employee. These include, but are not limited to, repudiation of the contract of employment by the employer which is accepted by the employee and constructive dismissal. It is well established that where there is conduct by the employer that amounts to repudiation of the employment contract which is accepted by the employee, it is the conduct of the employer that brings the employment relationship to an end.

[133] The term constructive dismissal is generally used to describe a situation in which the act of the employer bring about the termination of employment even though the final act is the resignation of the employee. 29 It may be – as was observed by Young J in Brookton Holdings No 5 Pt Ltd v Kara Lar Holdings Pty Ltd30 – that there is no real difference between repudiation of the employment contract by an employer or constructive dismissal, although his Honour also observed in that case that “some philosophers might find some ground for distinction”.31

[134] It is clear that the concept of constructive dismissal is dealt with by s. 386(1)(b) and that s. 386(1)(a) covers other situations where the employee does not voluntarily leave employment so that termination of employment is at the initiative of the employer. There are a number of authorities for the proposition that a reduction in hours or pay for a casual employee can constitute termination of employment at the initiative of the employer. These cases variously deal with the subject on the basis of considering whether the reduction in hours constitutes a repudiation of the contract of employment so that the acceptance of the repudiation brings the employment relationship to an end or whether the reduction forces the employee to resign so that the termination of employment is a constructive dismissal. As previously noted there may be little if any distinction between these situations and in both cases the employee may have been dismissed. However whether the employee can assert that a reduction in hours is a repudiation of the contract of employment or constructive dismissal, depends on the nature of the casual employment.

[135] In Field v the Returned and Services League (Mount Gambier Sub-Branch & Memorial Club) Inc T/A Mount Gambier Community RSL 32 the Applicant had been employed as a casual Food and Beverage Attendant initially working 12 hours per week increasing to 38 hours after several months. Approximately 8 months after commencing employment the Applicant was offered a permanent full-time position on a probationary basis. The Applicant was given a letter advising her that she had been “promoted” from casual to full time on a three month trial basis and that should the applicant’s performance during the probationary period be satisfactory her position “may possibly become permanent”.33

[136] After a series of incidents the Applicant’s hours were reduced so that she was offered only 2 shifts with a total of 7 hours in the weeks prior to the ending of her employment. The applicant in that case was also required to contact the employer to find out whether additional shifts were available for her to work. Deputy President Bartel found that this constituted a significant change in the applicant’s employment arrangements. Further, the Deputy President found that the applicant was not a casual employee at common law for many months before her “promotion” to a full-time position. 34 After considering cases in relation to repudiation of employment, the Deputy President found that the respondent terminated the employment relationship when it reduced her hours of work which constituted a repudiation of the employment relationship. The Deputy President went on to find that the applicant accepted the repudiation when she refused to work any shifts unless her full time position was reinstated and that the applicant was dismissed at the initiative of the employer.35

[137] In Urand v Beaconsfield Children’s Hub 36 Deputy President Hamilton considered that a reduction in hours from 4 to 2 shifts per week with a possibility only of additional shifts, was a very substantial reduction. The Deputy President concluded that the applicant was forced to tender her resignation and indicated this at the time and that this was a constructive dismissal so that the applicant’s employment ended at the initiative of the employer. In Hogan v TAB Hotels Pty Ltd T/A The Jubilee Hotel37 Commissioner Hunt considered whether the resignation of a casual employee was a constructive dismissal. The facts in that case were that the casual employee had been employed for some ten years and had usually worked for 30 + hours per week. Following a period of unpaid absence due to personal illness, the applicant’s hours were reduced to 13.5 hours causing the applicant to resign her employment after informing her employer that she was forced to resign due to the reduced hours. In determining that the termination of employment was not a case of constructive dismissal, Commissioner Hunt noted that the reduction was temporary and the applicant had no reason to consider that it was permanent and that the applicant had other options which she had not utilised to complain of the reduction of her hours.

[138] In Goodwin v Shanaya Pty Ltd T/A Dominos Pizza 38 the Commission found that the applicant’s resignation followed a period of 5 weeks in which his hours had been reduced to zero then maintained at a level significantly lower than the average for the previous 20 weeks and that in circumstances where the applicant had attempted to resolve the issue with the franchise head office it was reasonable for the applicant to resign. The Commission also found that the applicant in that case did not want to resign but that the respondent’s conduct had forced the applicant into a position where he had no reasonable option but to resign. It is notable that in Goodwin v Shanaya the Applicant took reasonable steps to resolve the reduction of his hours with the head office of the franchisor of the employer’s operation.

[139] The decision of a Full Bench of the Commission in Wilson v Town of Victoria Park 39 involved an appeal against a decision of the Commission to the effect that a casual employee whose hours had been reduced had not been constructively dismissed in circumstances where he resigned his employment in protest at the reduction. In that case the Full Bench of the Commission noted that the applicant’s written contract of employment provided that his casual hours would be rostered in accordance with the operational needs of the employer, could vary from week to week and were not guaranteed. In refusing permission to appeal the Full Bench said:

“[16] The appeal grounds which we have earlier set out contend that the Commissioner erred in making significant errors of fact. We are not satisfied that any of these grounds of appeal are arguable. Mr Wilson’s case appears to depend on the proposition that the resolution of the September 2016 dispute concerning his working hours was resolved on the basis that he was indefinitely guaranteed 5.5 hours’ work per week. The Commissioner, having carefully assessed the competing evidence about this, found that no such guarantee was given, and that to the contrary Mr Wilson was told that as a casual employee his hours might change again in the future according to Victoria Park’s operational needs. This was consistent with the basis upon which he was originally engaged. Beyond the assertion that Mr Wilson’s evidence should have been preferred, no basis has been demonstrated for considering that the Commissioner’s finding about the resolution of the September 2016 dispute was attended by appealable error. Mr Wilson’s contention therefore that the proposed alteration to his working hours in late December 2016 represented a repudiation of his employment contract is therefore misconceived.

[17] On the facts as found by the Commissioner, it was simply not open to find that any conduct on the part of Victoria Park had forced Mr Wilson to resign. It was entitled under its employment arrangement with him to alter his hours of work. Once he protested about this, Victoria Park made it clear to Mr Wilson that it was willing to discuss a resolution of the problem (as it had successfully done in September 2016). There are no facts demonstrating or supporting the inference that Victoria Park intended Mr Wilson’s employment to terminate or that it foresaw that this would be the likely consequence of its conduct.” 40

[140] In City of Sydney RSL v Balgowan a Full Bench of the Commission considered whether an alteration to shifts, work location and duties performed by a casual employee was a repudiation of the contract of employment and whether there was a constructive dismissal. The Full Bench noted that the decision at first instance had not expressly determined whether the applicant had resigned her employment or that the employer had directly terminated the employment. Instead the decision at first instance dealt with the concept of constructive dismissal and determined that the conduct of the employer was a repudiation of the contract of employment which the employee was entitled to accept, thereby bringing the contract of employment (and the employment relationship under it) to an end, with the consequence the employee was dismissed.

[141] The Full Bench in Balgowan expressed reservations about whether the concept of repudiation of an employment contract could operate with respect to casual employment rather than making a definitive finding that repudiation could not operate with respect to casual employment contracts as a general rule. The Full Bench also observed that a finding that a contract has been repudiated requires an analysis of the terms of the contract and not just the conduct of the repudiating party. The Full Bench set out a passage in Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd 41 (Koompahtoo), a case where the High Court considered repudiation. From that case the following principles can be derived.

[142] Firstly, the term repudiation may be used in the sense of renunciation, which can be described as conduct which evinces an intention to no longer be bound by the contract or to fulfil it only in a manner substantially inconsistent with the party’s obligations. The test for renunciation is whether the conduct of one party is such as to convey to a reasonable person in the situation of the other party, renunciation of the contract as a whole or of a fundamental obligation under it. Secondly, the term may refer to any breach of a contract which justifies termination by the other party. A breach of contract by one party may entitle the other party to terminate where the obligation with which there has been a failure to comply has been agreed by the contracting parties to be essential or where breach of a non-essential term is sufficiently serious. 42

[143] The Full Bench in Balgowan stated:

“[18] The question whether there has been a repudiation of the contract of employment is determined objectively, it is unnecessary to show a subjective intention to repudiate and is a question of fact not law. Relevantly, for present purposes, repudiation may exist where an employer reduces the wages of an employee without the employee’s consent or where there is a serious non-consensual intrusion on the nature of the employee’s status and responsibilities in a way which is not permitted by the contract. Similarly, if an employer seeks to bring about a change in the employee’s duties or place of work which is not within the scope of the express or implied terms of the contract of employment, the conduct may evince an intention to no longer be bound by those terms. Therefore, in these circumstances if an employee does not agree to the change, which if agreed would amount to a variation of the contract, the employee may claim to have been constructively dismissed.

[19] Conduct of an employer which repudiates the contract of employment does not by that act alone bring the contract of employment to an end. A repudiation of the contract by the employer gives the employee who is not in breach the option to decide whether to continue, that is to affirm the contract, or to treat the contract as at an end by accepting the repudiation.

[20] As repudiation in the second sense referred to by the High Court in Koompahtoo involves conduct in breach of the contract of employment it is plainly necessary to identify the term or terms of the contract said to exist and which it is said has or have been breached. As was observed in North v Television Corporation Ltd:

“Until the terms of the contract are known and identified it is impossible to say whether or not any particular conduct is … a breach of such gravity or importance as to indicate a rejection or repudiation of the contract.” 43

[144] The Full Bench in Balgowan went on to find that although the applicant in that case was a casual employee engaged on a regular and systematic basis, her hours of work were not terms of a contract of employment of an ongoing nature which could only be altered by agreement. Rather, the number of shifts that the employee may be required to work, the location at which work would be undertaken and the duties to be performed in undertaking that work in the future, were matters of expectation – albeit reasonable expectation – but were not terms of a contract of employment. 44 The Full Bench in Balgowan also observed that there are a number of different characteristics of casual employment and that the fact that casual employees may have their period of employment recognised as continuous for the purposes of making an unfair dismissal application does not alter the fundamental contractual character of casual employment as a series of engagements each under a separate contract of employment. It was concluded in Balgowan that:

“[29] Since neither the future shifts, weekly hours and duties that the Respondent expected to work and perform nor the location at which that work would be undertaken were contractual, it was not open for the Commissioner to conclude that the proposed alteration, albeit short term, to the number of hours or shifts that the Respondent as a casual employee would be offered, the location at which work during those hours would be performed or the duties to be performed was a repudiation by the Appellant of the contract of employment. It follows that there was not a constructive dismissal.” 45

[145] Balgowan is not authority for the proposition that a casual employee can never be the constructively dismissed. Nor is that case authority for the proposition that constructive dismissal can only occur in circumstances where there has been repudiation of the employment contract. The concepts of constructive dismissal on the one hand and the ending of the employment relationship by the acceptance of repudiation of the underlying employment contract on the other hand, do not cover the same ground although they may overlap.

[146] To find that a casual employee who is within the scheme of the unfair dismissal provisions in Part 2-3 of the Act, could not be dismissed in circumstances where hours which that employee had been regularly and systematically rostered to work were removed by the employer, in circumstances where such conduct if perpetrated against a weekly employee would constitute dismissal, would also defeat the operation of those legislative provisions. An employee who has been dismissed and who is covered by the legislative scheme dealing with unfair dismissal is entitled to pursue an unfair dismissal application. However, where a casual employee asserts that dismissal occurred by either repudiation of the employment contract or by way of constructive dismissal because of a reduction in hours, that casual employee must establish that he or she has a continuous contract of employment rather than a contract of employment that ends at the conclusion of each engagement. An example of a case where a casual employee was found to have a continuing contract is Birchley v Downer EDI Mining Pty Ltd 46 where the Applicant was specifically named on a roster which ran for a 12 month period and was found to have been dismissed by virtue of being removed from the roster.

[147] In establishing that a casual contract of employment is continuous for the purposes of repudiation or constructive dismissal, it is not determinative that the employee is protected from unfair dismissal because he or she has served a minimum employment period in accordance with the requirements in s. 384(2). In short, meeting the requirements in s. 384(2) means that a casual employee is protected from unfair dismissal in that he or she may make an application seeking a remedy for unfair dismissal. Those requirements do not determine whether the employee has a contract of employment that is capable of being repudiated by the employer or the subject of constructive dismissal.

[148] In the present case the Applicant and the Respondent agree that the Applicant resigned her employment on 11 February 2019 although there is no evidence about how the resignation was communicated. The Applicant has also conducted her case on the basis of asserting that the resignation was forced and amounted to a constructive dismissal. Notwithstanding this I have considered the ending of the employment relationship between the Applicant and the Respondent in the context of both repudiation and constructive dismissal.”

Smith v Australian Leisure & Hospitality Group Pty Limited (2020) FWC 2347 delivered 8 May 2020 per Asbury DP