This extract from an unfair dismissal decision of the Fair Work Commission contains a very useful summary of the circumstances in which a resignation may be regarded as a constructive dismissal.
“Has the Applicant been dismissed?
[19] A threshold issue to be determined in this matter is whether the Applicant has been dismissed from his employment. The circumstances in which a person is taken to be “dismissed” are set out in s 386 of the Act. Section 386(1) relevantly provides as follows:
(1) A person has been dismissed if:
(a) the person’s employment with his or her employer has been terminated on the employer’s initiative; or
(b) 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.
[20] Section 386(2) of the Act sets out circumstances where an employee has not been dismissed, none of which are presently relevant.
[21] In Bupa Aged Care Australia Pty Ltd t/a Bupa Aged Care Mosman v Shahin Tavassoli30 (Bupa), a Full Bench was dealing with an appeal of a decision in which the member at first instance found that the dismissal was within the meaning of s 386(1) and that the dismissal was unfair. The Full Bench identified there were two elements to s 386(1) and after extensively considering the authorities, said as follows;
“[47] Having regard to the above authorities and the bifurcation in the definition of “dismissal” established in s 386(1) of the FW Act, we consider that the position under the FW Act may be summarised as follows:
(1) There may be a dismissal within the first limb of the definition in s 386(1)(a) where, although the employee has given an ostensible communication of a resignation, the resignation is not legally effective because it was expressed in the “heat of the moment” or when the employee was in a state of emotional stress or mental confusion such that the employee could not reasonably be understood to be conveying a real intention to resign. Although “jostling” by the employer may contribute to the resignation being legally ineffective, employer conduct is not a necessary element. In this situation if the employer
simply treats the ostensible resignation as terminating the employment rather than clarifying or confirming with the employee after a reasonable time that the employee genuinely intended to resign, this may be characterised as a termination of the employment at the initiative of the employer.
(2) A resignation that is “forced” by conduct or a course of conduct on the part of the employer will be a dismissal within the second limb of the definition in s 386(1)(b). The test to be applied here 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. Unlike the situation in (1), the requisite employer conduct is the essential element.” (my emphasis added)
[22] The Applicant contends that he was dismissed within the meaning of the second limb of s 386(1), that being he resigned, but was forced to do so because of conduct or a course of conduct engaged in by the Respondent. It is to that I now turn.
Whether Applicant was dismissed within meaning of s 386(1)(b)
[23] The Applicant submits that his resignation was forced by a course of conduct of the Respondent in that it had failed to pay his salary after August 2023, it had failed to reimburse expenses he had incurred in conducting business for the Respondent and it had failed to provide him with directions regarding the duties he was required to perform. The Applicant refers to the numerous emails he sent to Mr Papadopoulos and Mr Pouzoulis regarding unpaid salary and expenses and to his email of 26 February 2024 in which he sought clarity on the tasks he was required to focus on. None of that communication from the Applicant elicited a response from the Respondent apart from Mr Papadopoulos’ email reply on 12 December 2023 assuring the Applicant that his concerns of non-payment of salary and expenses were not being ignored. The Respondent rejects that there was in fact a resignation in March 2024 and cites the Applicant’s earlier resignation in October 2024 as the point at which the Applicant ceased to have any salary entitlement. That argument by the Respondent must be rejected for the following reasons.
[24] The Applicant was a director of the Respondent following its ‘start-up’ in 2020. He also became an employee at the start of 2023 as a consequence of a resolution presented to the Board in December 2022 by Mr Pouzoulis. The resolution which was passed by the Board provided for contracts of employment to be offered to several employees including the Applicant. In the case of the Applicant, he was employed as an Executive Director and was entitled to receive a monthly salary of $10,500 which he did in fact receive up until August 2023, after which no further salary payments were made. As earlier stated, the Applicant resigned as a director of the Respondent on 10 October 2023 for the reasons set out in his email to Mr Pouzoulis on that day.
[25] The Respondent seeks to characterise the Applicant’s 10 October 2023 resignation from the Respondent’s Board as also being a resignation as an employee. It is not. The Applicant’s roles of director and employee were separate and distinct, and his email of 10 October 2023 specifically referred to his resignation from the board of the Respondent only. The email made
no reference to him resigning his employment. Furthermore, the evidence of the Applicant, Mr Peppin and Mr Livissionos comfortably establishes that the Applicant continued to perform work for the Respondent after 10 October 2023. Mr Pouzoulis’ evidence to the contrary is not accepted. Moreover, no steps were taken by Mr Pouzoulis to clarify his view of the Applicant’s employment status after 10 October 2023 despite multiple emails from the Applicant regarding unpaid salary and expenses. In fact, Mr Papadopoulos assured the Applicant on 12 December 2023 that the Applicant’s concerns over non-payment of salary and expenses were not being ignored. If it is true as Mr Pouzoulis now claims that the Applicant ceased his employment on 10 October 2023, it is striking that there is no evidence of any communication to the Applicant from the Respondent after that date clarifying that he had no salary entitlement after the 10 October 2023 by reason his ‘resignation’ both as a director and employee.
[26] It follows from the foregoing that I do not accept the Respondent’s argument that the Applicant resigned his employment on 10 October 2024. Rather, he resigned his employment on 19 March 2024 following several months of non-payment of his contractual entitlement of a monthly salary of $10,500, non-payment of claimed expenses and no apparent direction on the tasks he was required to focus on. By any standard, the non-payment of salary for several months is conduct of an employer that is likely to leave an employee no choice but to resign. That the Applicant put up with that state of affairs for several months shows remarkable forbearance on his part and his apparent regard for the tenuous financial position of the Respondent.
[27] I accept that the Applicant was a shareholder of the Respondent, was also a former director, had an appreciation of the difficult financial position of the Respondent and that Mr Pouzoulis held a genuine desire to assist the Applicant transition to GC. That said, as of 19 March 2024, the Applicant was still an employee and had not been paid for several months. I accept that those circumstances ‘forced’ his resignation and while it may not have been deliberate conduct of the Respondent, I am satisfied that the Applicant’s resignation was the probable result of the employer’s conduct such that he had no effective or real choice but to resign. It follows that the Applicant was dismissed within the meaning of s 386(1) of the Act.
Initial matters
[28] Having found that the Applicant was dismissed with the meaning of s 386(1) of the Act, I am now obliged under section 396 of the Act, to decide the following matters before considering the merits of the application:
(a) whether the application was made within the period required in subsection 394(2);
(b) whether the person was protected from unfair dismissal;
(c) whether the dismissal was consistent with the Small Business Fair Dismissal Code; and
(d) whether the dismissal was a case of genuine redundancy.
[29] Relevant to the determination of the preliminary matters I am satisfied that;
• the Applicant was dismissed on 19 March 2024 and filed his unfair dismissal application on 8 April 2024, that latter date being within 21 days of the date of his dismissal;
• the Applicant commenced employment with the Respondent on 1 January 2023 and at the time of his dismissal had been employed for a period of approximately 15 months, that period being more than the minimum employment period of twelve months in the case of a small business employer;
• the Applicant was employed on an annual salary of $126,000, which was less than the high-income threshold (HIT) at the time of his dismissal, that of $167,500; and
• the Applicant was not dismissed due to the Respondent no longer requiring the Applicant’s job to be performed by anyone because of changes in the operational requirements of the Respondent’s enterprise.
[30] Having considered each of the initial matters, I am satisfied that the application was made within the required period in s 394(2), the Applicant was a person protected from unfair dismissal and the dismissal was not a genuine redundancy. However, at the time of the Applicant’s dismissal the Respondent claims that it employed seven employees and was a small business employer within the meaning of s 23 of the Act. I am consequently required to determine whether the Respondent was a small business employer and if so whether the Applicant’s dismissal was consistent with Small Business Fair Dismissal Code (the Code). It is to that I now turn.”
Merry v Swisstec Investment Holdings [2025] FWC 58 delivered 8 January 2025 per Masson DP