What is a constructive dismissal?

Here is an excellent summary of the legal principles which apply to resolving the issue whether a resignation by an employee can be regarded as a constructive dismissal in an extract taken from an unfair dismissal case decision.

“Has the Applicant been dismissed?

[42] 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.

[43] Section 386(2) of the Act sets out circumstances where an employee has not been dismissed, none of which are presently relevant.

[44] The authorities in respect of the meaning of the term ‘dismissed’ are well traversed and it is useful to detail some of them at this point. In a decision made prior to the passage of the Act, the Full Court of the Industrial Relations Court of Australia Mohazab v Dick Smith Electronics Pty Ltd43 (Mohazab) was considering whether an employee had been forced to resign in circumstances where the employee signed a letter of resignation drafted by the employer shortly after being interviewed in relation to allegations of dishonesty. After setting out the findings of fact the Full Court said the following when considering the meaning of ‘termination at the initiative of 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 (“David Graphics”), Industrial Relations Court of Australia, NI 94/0174, 12 July 1995, as yet unreported, Wilcox CJ. His Honour, at 3, referred to the situation 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 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.’” (our emphasis added)”

[45] In a more recent Full Bench decision in Bupa Aged Care Australia Pty Ltd t/a Bupa Aged Care Mosman v Shahin Tavassoli44 (Bupa), the 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 in Bupa was concerned with a ‘forced’ resignation and how the passage of the FW Act impacted prior authorities when it stated as follows;

“[33] Notwithstanding that it was clearly established, prior to the enactment of the FW Act, that a “forced” resignation could constitute a termination of employment at the initiative of the employer, the legislature in s.386(1) chose to define dismissal in a way that retained the “termination at the initiative of the employer” formulation but separately provided for forced resignation. This was discussed in the Explanatory Memorandum for the Fair Work Bill as follows:

“1528. 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).

  1. 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).
  2. 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.”

[46] Having identified there were two elements to s.386(1) and after extensively considering the authorities, the Full Bench then said;

“[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)

[47] In the present matter the Applicant articulated in the proceedings that he had been dismissed within the meaning of the second limb of s. 386(1) that being he had resigned from his employment with the Respondent, but was forced to do so because of conduct, or a course of conduct, engaged in by his Respondent.

Consideration

Whether Respondent’s conduct or course of conduct forced the resignation of the Applicant (s. 386(1)(b))

[48] In considering whether the Applicant was dismissed within the meaning of s 386(1)(b) of the Act, it is necessary for me to make some evidentiary findings. There is a factual contest over a number of matters, most significantly in relation to the substance of the conversation between the Applicant and Mr Pawsey during their meeting which took place between 10-11am on 31 August 2022, following which the Applicant tendered his resignation.

[49] It is uncontroversial that the Applicant commenced employment with the Respondent on 5 July 2021 as Security and Market Safety Lead for Australia & New Zealand. He initially reported to Andrew Chan, then Cherralina Wong before briefly reporting to Chandrasegaran Marappen who each held the role of Security & Market Safety Lead for the South Asian Region at various times during the Applicant’s employment with the Respondent.

[50] While the Applicant is correct to say that he was not subject to formal performance management during his employment with the Respondent, I do accept that there were some concerns regarding his performance. These were identified by Mr Pawsey in his evidence and were not fully or effectively rebutted by the Applicant. While the Applicant downplays the significance of Ms Yun’s feedback on the PML 108 policy review, it is clear enough on reading her feedback that she was not happy with the quality of the Applicant’s work, which I do not accept can be simply put down to the ‘business as usual’ process of policy review. As regards the Applicant’s evidence that his level of engagement with stakeholders and the quality and pace of his work was not discussed during his July 2022 performance review discussion with Ms Wong, I find that unconvincing. That is because of the record of that discussion and the fact that the Applicant had not checked or sought to add his comments to the review discussion record, even though he was aware he was able to.

[51] While I accept that there were concerns regarding the Applicant’s performance, those concerns had not, prior to 31 August 2022, escalated to the point of being addressed in a formal performance management discussion or PIP. While Mr Pawsey states a performance discussion was originally planned in early August 2022, it did not proceed due to the Applicant’s absence due to illness and Ms Wong’s departure in August and replacement by Mr Marappen on 15 August 2022. The fact that no formal performance management process had been initiated at the point Mr Marappen commenced in mid-August 2022 and taking into account Mr Marappen’s unchallenged evidence that he wanted to form his own view about the Applicant’s performance, strongly indicates that the performance concerns were not so serious as to place the Applicant at imminent risk of termination of employment.

[52] It is against the above background of concerns over the Applicant’s performance that various discussions took place on 31 August 2022 involving the Applicant, Mr Pawsey and Mr Marappen. As set out above in the evidence, and I accept that, a meeting had been previously arranged for midday on 31 August 2022 involving the Applicant, Mr Pawsey and Mr Marappen as a means of Mr Marappen introducing himself to the Applicant and setting out role expectations. The purpose of the meeting then changed as a consequence of a discussion between Mr Pawsey and Mr Marappen on the evening of 30 August 2022 when they agreed that as a consequence of their concerns over the Applicant’s performance, the meeting would be used to discuss those performance concerns and give the Applicant an opportunity to respond on those issues. Mr Pawsey and Mr Marappen were both adamant and were not challenged on their evidence that the revised purpose of the meeting was not to dismiss the Applicant but to engage with him over their performance concerns.

[53] The evidence reveals that Mr Pawsey telephoned the Applicant at approximately 8.00am on the morning of 31 August 2022 to advise him that the purpose of the midday meeting had changed and would now focus on his performance. Mr Pawsey gave unchallenged evidence that he also asked the Applicant whether he was comfortable in proceeding with the meeting, advised him that he was able to be accompanied by a support person and assured him that the meeting was not a disciplinary meeting. The Applicant then attended the workplace for the midday meeting as requested by Mr Pawsey.

[54] A private meeting then took place between the Applicant and Mr Pawsey at some time between 10-11am on 31 August 2022. It is during this meeting that the Applicant says Mr Pawsey stated to him that the likely options arising from the midday meeting were that of either performance management which could lead to termination of employment or immediate termination of employment. He also claims Mr Pawsey encouraged him to resign because of the impact on his career prospects if he were dismissed, although he did concede that he was not told by Mr Pawsey that he was going to be dismissed at the midday meeting. For his part, Mr Pawsey flatly rejected the Applicant’s evidence and says he provided an explanation of the generic performance management process to the Applicant to ensure he understood that process prior to the midday meeting. Both the Applicant and Mr Pawsey were equally resolute in their conflicting versions of the private conversation they held. However, for the reasons that follow I prefer the evidence of Mr Pawsey.

[55] Firstly, the Applicant’s version of events did change over time. In the 27 September Letter, the Applicant stated that he was told he was “going to be dismissed” a statement he reluctantly conceded in cross-examination was inaccurate and was made in the context of a letter prepared and sent to the Respondent on 27 September 2022 with the primary purpose of encouraging settlement discussions. The version given in evidence was also different to that provided by the Applicant in his Form F2 where he stated that Mr Pawsey called him on the morning of 31 August 2022 and informed him that he was “likely to be dismissed” at a meeting scheduled that day. The differences between the Applicant’s evidence in the hearing and the version set out in the 27 September 2022 and Form F2 causes me to approach with caution his evidence as to what was actually said to him by Mr Pawsey in their private meeting.

[56] Secondly, the prospect of the Applicant’s immediate termination claimed to have been outlined by Mr Pawsey as one of the likely outcomes of the midday meeting on 31 August 2022 cannot be reconciled with the absence of any formal performance management being in place at that point. Further, such a statement was contrary to the Respondent’s Performance Management Guideline which provides for an escalating approach to performance management. As set out above, the nature of the performance concerns held by the Respondent regarding the Applicant were not so serious as to have placed the Applicant at imminent risk of termination of employment. This was readily conceded by Mr Pawsey. To have suggested otherwise would have been unsustainable where serious misconduct was not alleged and where there were no formal warnings in place the Respondent could have relied on. It is inherently unlikely in these circumstances that Mr Pawsey as an experienced HR professional would have foreshadowed the potential for immediate termination.

[57] Thirdly, at no point on the 31 August 2022 following his private discussion with Mr Pawsey did the Applicant raise the pressure to resign that he says flowed from his meeting with Mr Pawsey. He did not raise it (the pressure to resign) in the midday meeting with Mr Marappen nor in his resignation email or in discussions with his colleagues. It was only in the 27 September 2022 Letter that the allegation was raised that he had been pressured to resign.

[58] Fourthly, the evidence of Mr Pawsey was forthright and consistent. He set out in his evidence the information that he provided to the Applicant in their private meeting. He agreed that he explained to the Applicant that a potential consequence of performance management could be termination of employment and that some employees elected to resign during the process of performance management. I found Mr Pawsey to be a credible witness and accept that he made clear to the Applicant that a decision to resign was a matter for an individual undergoing a performance management process and that he had not encouraged the Applicant to do so.

[59] Finally, the Applicant did not rebut Mr Pawsey’s evidence that in a conversation two days prior to the meeting on 31 August 2022, he had confided to Mr Pawsey that he was pursuing roles externally including with a former employer and requested that Mr Pawsey act as a referee. Nor did the Applicant challenge the evidence of Mr Pawsey and Mr Marappen that during the midday meeting on 31 August 2022 he had stated to them that he did not see a long term career with the Respondent, had commenced an external recruitment process and did not want to work under a performance management process. The Applicant walked back from those statements during cross-examination and agreed that while he accepted he made statements to that effect during the midday meeting, he now says they were not true.

[60] It follows from the above that I prefer the evidence of Mr Pawsey where there is a conflict with that of the Applicant. I am satisfied that in the private meeting held with the Applicant between 10-11am on 31 August 2022, Mr Pawsey explained to the Applicant the performance management process in generic terms which included highlighting that in some circumstances it could lead to termination of employment. He further stated that some employees elected to resign rather than move through such a process. I am not however persuaded that Mr Pawsey stated to the Applicant that one of the likely outcomes of the midday meeting on 31 August 2022 was that of the Applicant’s termination of employment. Nor do I accept that Mr Pawsey, by his comments to the Applicant, encouraged him to resign. In these circumstances I am inclined to the view that the Applicant’s recollection of the discussion may be inaccurate as the alternative is that he has deliberately misrepresented the content of the discussion to best advantage his case in these proceedings.

[61] Shortly after his private meeting with Mr Pawsey and prior to the midday meeting, the Applicant prepared and sent his resignation to Mr Pawsey and Mr Marappen. The midday meeting followed shortly after during which the Applicant’s intentions were discussed. Throughout the meeting the Applicant maintained a calm demeanour, which he now says was a façade. That may be the case, but the impression obtained by both Mr Marappen and Mr Pawsey was that he was calm and relaxed about his decision to resign, that view being reinforced by comments the Applicant made regarding pursuing external options and not seeing a long term career with the Respondent. The Applicant also refers to mental health impacts of his dismissal but has led no evidence, medical or otherwise, in support of that claim. Notwithstanding the Applicant’s claims to the contrary in these proceedings, there was no indication in his demeanour or comments made during meetings on 31 August 2022 that he felt pressured to resign. Mr Pawsey and Marappen treated his resignation as genuine and accepted it shortly after the midday meeting.

[62] It follows from the above that I am satisfied that the Respondent did not engage in conduct on 31 August 2022 or before that date that had the intention of bringing the Applicant’s employment to an end. Nor do I accept that the probable result of the Respondent scheduling a meeting to discuss performance concerns with the Applicant, prior to which Mr Pawsey outlined generic performance management processes, was that the employment would be brought to end. Furthermore, I do not accept the Applicant had no effective or real choice but to resign. He could have engaged in the midday discussion, put his views to his new manager Mr Marappen regarding the performance concerns held, and if a PIP were implemented, he could have worked to address any performance gaps. That the Applicant chose to resign rather than participate in a process that may have resulted in a PIP does not meet the high hurdle necessary to establish he had no real or effective choice.

[63] I am not satisfied that the Applicant’s resignation was due to the conduct or course of conduct engaged in by the Respondent such that he was dismissed within the meaning of s. 386(1)(b) of the Act. On the basis of my finding that the Applicant was not dismissed within the meaning of s 386(1)(b) and as 386(1)(a) was not contended as being relevant, it is unnecessary for me to deal with the second jurisdictional objection.

[64] However, if I am wrong in my conclusion that the Applicant was not dismissed within the meaning of section 386(1) of the Act, it is appropriate for me to deal with the second jurisdictional objection that the application was made out of time. For the reasons set out below I would also decline to grant an extension of time for the application to be made.

Should an extension of time be granted for the filing of the unfair dismissal application?

[65] As earlier stated, the Applicant filed his application for an unfair dismissal remedy on 4 October 2022. Section 394(2) of the Act states that an application for an unfair dismissal remedy must be made ‘within 21 days after the dismissal took effect’, or within such further period as the Fair Work Commission (the Commission) allows pursuant to s.394(2). The Applicant states that the dismissal took effect on 28 September 2022 although this is disputed by the Respondent who states the termination of employment took effect on 31 August 2022. The contest over the termination date must be resolved as the period of 21 days will have ended at midnight on either the 19 October 2022 if it is established that the date of termination was 28 September 2022 or 21 September 2022 if it is established that the date of termination was 31 August 2022.

[66] If the dismissal took effect on 28 September 2022 the application will have been filed within the 21-day period as it was filed on 4 October 2022. If, however the dismissal took effect on 31 August 2022 as contended by the Respondent, it will be necessary to consider whether to grant a further period within which the application may be made under s.394(3) of the Act. I turn firstly to determine the date of the Applicant’s termination of employment.

[67] The Applicant contends that his employment ended on 28 September 2022 and relies primarily on his resignation email which states that his last day would be 28 September 2022, which was said to be the conclusion of his 4 week notice period. The Applicant also relies on the failure of Mr Marappen to clarify in his responsive email on 31 August 2022 accepting the Applicant’s resignation that his dismissal would take effect immediately. The Applicant also points to the email he received from HR on 17 October 2022 regarding his health insurance coverage which was extended to 28 September 2022.

[68] I do not accept that the date of termination was 28 September 2022. I am satisfied the Respondent accepted the resignation and elected to pay out the notice period as it was able to under the Employment Agreement. This was, on the unchallenged evidence of Mr Pawsey, communicated to the Applicant during the midday meeting on 31 August 2022. What then followed was entirely consistent with the Respondent electing to end the employment relationship on 31 August 2022. This can be readily seen by the relevant facts conceded by the Applicant set out at [37]. The Applicant ceased work that day, handed in his security card, said goodbye to colleagues, stated to those colleagues that he was finishing immediately, immediately lost access to the Respondent’s IT systems, did not undertake any further work for the Respondent after 31 August 2022 and his final pay was processed shortly after 31 August 2022. All of these actions clearly point to the Applicant’s dismissal taking effect on 31 August 2022.

[69] As regards the 17 September 2022 email from HR, Mr Pawsey explained the process followed by the Respondent in extending the period of health insurance. This does not support a conclusion that the date of dismissal was 28 September 2022. As regards the Applicant’s statement that be believed he was on gardening leave, he conceded that he was not advised by the Respondent that he was on gardening leave. His belief that he was on gardening leave has no reasonable basis.”

Mathieson v Philip Morris Limited (2023) FWC 243 delivered 31 January 2023  Masson DP