What is a constructive dismissal?

Here is a portion from a recent decision of the Fair Work Commission in an unfair dismissal case which sets out the principles of constructive unfair dismissal.

“Consideration

A person has been dismissed if their employment has been terminated on the employer’s initiative.

In the matter of Mr Geoff Barkla v G4S Custodial Services Pty Ltd 16 a Full Bench of the Commission considered circumstances where the applicant employee argued he had not resigned from his employment but rather alleged that the employer’s conduct amounted to a dismissal.

The Full Bench noted that the case law on whether a resignation is forced by the conduct of the employer or that the employer’s conduct amounts to a constructive dismissal is helpful because it articulates the nature of employer conduct which will bring an employment contract to an end and set this out as below.

“[24] It is then necessary to consider whether any action of the employer amounted to termination of employment. It should be noted in this case that Mr Barkla did not resign from his employment. Rather he alleges that the employer’s conduct amounted to dismissal. There is considerable law on whether a resignation is forced by conduct of the employer or that the employer’s conduct amounts to a constructive dismissal either at common law or within the statutory definitions. In our view this law is helpful in the present context because it articulates the nature of employer conduct which will bring an employment contract to an end. This is what Mr Barkla has argued in this case. In O’Meara v Stanley Works Pty Ltd a Full Bench of the Australian Industrial Relations Commission discussed the relevant case law and outlined the legal considerations in the following terms:

“Termination at the initiative of the employer

[19] The circumstances in which a resignation, while apparently a termination of employment by the employee, nevertheless constitutes a termination at the initiative of the employer, have been considered in a number of cases. A prominent authority is the decision of a Full Court of the Federal Court of Australia in Mohazab v Dick Smith Electronics Pty Ltd  (Mohazab). In that case, the employer made a threat that unless the employee resigned the employer would ask the police to charge the employee with an offence. The analysis of the concept of termination at the initiative of the employer by the Court in that case has not always been quoted in full. It is desirable that we do so in this case. After referring to dictionary definitions of the term “initiative” and the convention giving rise to the statutory provisions, the Full Court said:

“These definitions reflect the ordinary meaning of the word ‘initiative’. Viewed as a whole, the Convention is plainly intended to protect workers from termination by the employer unless there is a valid reason for termination. It addresses the termination of the employment relationship by the employer. It accords with the purpose of the Convention to treat the expression ‘termination at the initiative of the employer’ as a reference to a termination that is brought about by an employer and which is not agreed to by the employee. Consistent with the ordinary meaning of the expression in the Convention, a termination of employment at the initiative of the employer may be treated as a termination in which the action of the employer is the principal contributing factor which leads to the termination of the employment relationship. We proceed on the basis that the termination of the employment relationship is what is comprehended by the expression ‘termination of employment’: Siagian v Sanel (1994) 1 IRCR 1 at 19; 54 IR 185 at 201. In many, if not most, situations the act of the employer that terminates the employment relationship is not only the act that puts in train the process leading to its termination but is, in substance, the entire process. An example would be a situation where the employer decided to dismiss an employee and did so orally or in writing with immediate effect. Other situations may be more complex as exemplified by the circumstances considered by Moore J in Grout v Gunnedah Shire Council (1994) 1 IRCR 143; 57 IR 243 where an employee had given written notice purporting to terminate the employment relationship. The notice was not reasonable but was accepted by the employer which later refused to allow the employee to withdraw the notice. A question arose as to whether that was a termination of the employment at the initiative of the employer and his Honour held it was. His Honour said at 160-161; 259:

‘I have already said that Div 3 concerns termination at the initiative of the employer. The respondent submits that “initiate” means “to begin, commence, enter upon; to introduce, set going, or initiate”: see Shorter Oxford English Dictionary. In this matter, it is submitted, it was the applicant and not the respondent that initiated the termination by writing the letter of 18 May. This, in my opinion, gives the expression “termination” in the Act, read in conjunction with Art 3 of the Convention which speaks of “termination … at the initiative of the employer”, a narrow meaning that was not intended. A principal purpose, if not the sole purpose, of Div 3 is to provide an employee with a right to seek a remedy in circumstances where the employee did not voluntarily leave the employment. An employee may do some act which is the first in a chain of events that leads to termination. An example would be an employee who engaged in misconduct at work which ultimately led to the employer dismissing the employee. However, that situation and the present are not situations where the termination was at the initiative of the employee. In both instances the step or steps that effectively terminated the employment or purported to do so were taken by the employer.’

In these proceedings it is unnecessary and undesirable to endeavour 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 the 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. This issue was addressed by Wilcox CJ in APESMA v David Graphics Pty Ltd (unreported, Industrial Relations Court of Australia, 12 July 1995, Wilcox CJ). His Honour, at p 3, referred to the situation of an employee who resigned because ‘he felt he had no other option’. His Honour described those circumstances as:

‘… a termination of employment at the instance [of] the employer rather than of the employee.’

And at p 5:

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

[20] Moore J, one of the members of the Full Court in Mohazab, addressed the question further in Rheinberger v Huxley Marketing Pty Limited  (Rheinberger). His Honour said, after referring to extracts from Mohazab:

“However it is plain from these passages that it is not sufficient to demonstrate that the employee did not voluntarily leave his or her employment to establish that there had been a termination of the employment at the initiative of the employer. Such a termination must result from some action on the part of the employer intended to bring the employment to an end and perhaps action which would, on any reasonable view, probably have that effect. I leave open the question of whether a termination of employment at the initiative of the employer requires the employer to intend by its action that the employment will conclude. I am prepared to assume, for present purposes, that there can be a termination at the initiative of the employer if the cessation of the employment relationship is the probable result of the employer’s conduct.”

[21] In this Commission the concepts have been addressed on numerous occasions and by a number of Full Benches. In Pawel v Advanced Precast Pty Ltd  (Pawel) a Full Bench said:

“[13] It is plain that the Full Court in Mohazab considered that an important feature in the question of whether termination is at the initiative of the employer is whether the act of an employer results directly or consequentially in the termination of the employment and that the employment relationship is not voluntarily left by the employee. However, it is to be noted that the Full Court described it as an important feature. It plainly cannot be the only feature. An example will serve to illustrate this point. Suppose an employee wants a pay rise and makes such a request of his or her employer. If the employer declines and the employee, feeling dissatisfied resigns, can the resignation be said to be a termination at the initiative of the employer? We do not think it can and yet it can be said that the act of the employer i.e. refusing the pay rise, has at least consequentially resulted in the termination of the employment. This situation may be contrasted with the position where an employee is told to resign or he or she will be terminated. We think that all of the circumstances and not only the act of the employer must be examined. These in our view, will include the circumstances giving rise to the termination, the seriousness of the issues involved and the respective conduct of the employer and the employee. In the instant case the uncontested factual findings are that the applicant had for almost the whole of his employment performed welding duties; that there was no objective threat to his health and safety involved in the requirement that he undertake welding duties so long as it was not on a continuous basis and that the welding he was required to do was not continuous.”

[22] In the Full Bench decision of ABB Engineering Construction Pty Ltd v Doumit  (ABB Engineering) it was said:

“Often it will only be a narrow line that distinguishes conduct that leaves an employee no real choice but to resign employment, from conduct that cannot be held to cause a resultant resignation to be a termination at the initiative of the employer. But narrow though it be, it is important that that line be closely drawn and rigorously observed. Otherwise, the remedy against unfair termination of employment at the initiative of the employer may be too readily invoked in circumstances where it is the discretion of a resigning employee, rather than that of the employer, that gives rise to the termination. The remedies provided in the Act are directed to the provision of remedies against unlawful termination of employment. Where it is the immediate action of the employee that causes the employment relationship to cease, it is necessary to ensure that the employer’s conduct, said to have been the principal contributing factor in the resultant termination of employment, is weighed objectively. The employer’s conduct may be shown to be a sufficiently operative factor in the resignation for it to be tantamount to a reason for dismissal. In such circumstances, a resignation may fairly readily be conceived to be a termination at the initiative of the employer. The validity of any associated reason for the termination by resignation is tested. Where the conduct of the employer is ambiguous, and the bearing it has on the decision to resign is based largely on the perceptions and subjective response of the employee made unilaterally, considerable caution should be exercised in treating the resignation as other than voluntary.”

[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 to 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.” (References omitted)

[25] In our view it cannot be said that in the circumstances of this matter Mr Barkla had no effective or real choice but to resign or treat his employment as terminated. At the time he filed his unfair dismissal application he was on sick leave having obtained medical certificates certifying him unfit for work. His secondment as ‘Supervisor Geraldton’ had recently been brought to an end given his claims of stress and his impending annual leave and leave without pay. He had enquired about the prospect of applying for the Geraldton Supervisors role and was permitted to do so. He was asked whether he would be interested in working in the pool of security offices until the commencement of his leave. There is no doubt that he was frustrated at the lack of progress in a disciplinary investigation into Mr Clinch’s conduct towards him. He was also apprehensive about resuming his duties in an environment where Mr Clinch continued to be employed and may engage in further verbal abuse. Separately or in combination these circumstances did not objectively lead to the situation whereby Mr Barkla had no effective or real choice but to resign or treat his employment as terminated by the employer.

[26] It follows that Mr Barkla was not dismissed and was not able to lodge an application under s394 of the Act. The decision of the Commissioner was correct in this regard. We do not see any reason why permission to appeal should be granted. Permission to appeal is refused.” (References omitted)

Considering the above principles, there are a number that are relevant to this case.

It is not sufficient to demonstrate that the employee did not voluntarily leave their employment to establish that there had been a termination of the employment at the initiative of the employer. Such a termination must result from some action on the part of the employer intended to bring the employment to an end or has the probable result of bringing the employment relationship to an end or that the employee had no effective or real choice but to resign.

Where the conduct of the employer is ambiguous, and the bearing it has on the decision to resign is based largely on the perceptions and subjective response of the employee made unilaterally, considerable caution should be exercised in treating the resignation as other than voluntary.

Similarly, to the circumstances the Full Bench was dealing with above, in this matter currently before the Commission, the Applicant did not expressly resign from his employment rather he alleges that the Respondent’s conduct amounted to the termination of his employment.

In the Applicant’s witness statement, he explains what occurred towards the end of the day on 29 April 2020 this way:

“•  I left the yard, still had the fuel, yard and shed keys which were given to me as my responsibility for everyday use…. as I assumed that they would speak with me the next day.

  • 20 minutes later received a call from Jenny, asking me to return the keys. (phone records to support, DOC 3 ) I understood this as they didn’t want me back, even though nothing was said by either parties.” 17

The evidence of the Applicant is that when he left the yard, he was expecting that he would be having a discussion with his employer the next day. At this point he did not believe his employment had been terminated by his employer.

The only thing that occurred to change his belief was that 20 minutes later Jenny from the office rang and asked him to return the keys. He says he understood this request to mean his employer didn’t want him back even though nothing was said.

It is not correct to say that being asked by someone from the office to return the Respondent’s keys was an unambiguous statement by the Respondent that the Applicant’s employment was terminated.

There could be any number of explanations why he was asked to return the keys. The Applicant had an opportunity to ask why he was being asked to return the keys but apparently did not do so then nor any time later.

As the evidence shows the reason the Respondent requested the Applicant return the keys was because they believed, from his actions and what he had said, that he was resigning from his employment.

Requesting he bring the keys back was not intended to bring the employment to an end nor on any objective view would it probably have that effect.

The Applicant put it fairly in his witness statement that nothing was said by either party to the other about his employment.

There was no communication from the Respondent to the Applicant that constituted an express termination of the employment.

The conduct of the employer, ringing the Applicant after he had left the yard and requesting him to return the keys was ambiguous. The Applicant’s belief at the time and assertion in these proceedings that his employment was terminated at the initiative of the Respondent is based entirely on his perception and subjective view of this request to return the keys.

It is not the case in my view that the Applicant had no real choice but to treat his employment as having been terminated. He simply could have asked the employer why he had been requested to return the keys, but he did not. He could have asked the Respondent to confirm that his employment had been terminated, but he did not.

Considered objectively these were not circumstances where there was no effective or real choice for the Applicant other than to treat his employment as terminated.

The evidence does not demonstrate that the Applicant’s employment was terminated on the Respondent’s initiative. Rather, the Applicant has acted on the mistaken belief that this was the case when it was not.

The Applicant was not dismissed and accordingly this application should not have been made.

The application will be dismissed and an order [PR723747] to that effect will be issued.”

Cacciola v Hazelton Property Group Pty Ltd (2020) FWC 5622 delivered 22 October 2020 per Williams C