Constructive dismissal: when resignation becomes an unfair dismissal personal grievance

Do not resign until you get advice

Constructive dismissal is the "wolf of dismissal in the sheep's clothing of resignation". If you resign, you may lose leverage and you can make the case harder than it needs to be.

A constructive dismissal is where an employer places an employee in a position where the employee has no choice but to resign. Where an employee resigns and claims constructive dismissal, the onus is on the employee to show that a dismissal has occurred. In essence, constructive dismissal is where the employee has fired the boss.

"It is the Wolf of dismissal in the sheep's clothing of resignation"
New Zealand Woollen Workers IUOW v Distinctive Knitwear NZ Ltd

The Court of Appeal has said constructive dismissal includes cases where:
Auckland, etc, Shop Employees, etc, IUOW v Woolworths (NZ) Ltd

• An employer gives an employee an option of resigning or being dismissed.
• An employer follows a course of conduct with the deliberate and dominant purpose of coercing an employee to resign.
• A breach of duty by an employer leads an employee to resign.

The courts have developed further case law around constructive dismissal, including:

• The "but for" test. If it was not but for the breach of duty of the employer.
• The "reasonably foreseeable" test. Was the breach of duty sufficiently serious that it was reasonably foreseeable there was a substantial risk of resignation?
• The "final straw" or the "cumulative effect".

While we often advise employees not to resign and instead allow the employer to make the dismissal decision (so we can run an actual unjustified dismissal case), there are situations where a resignation and constructive dismissal claim can be the better option. Proper and timely advice is recommended before taking action.

If you are contemplating resignation because of unsatisfactory treatment, or a situation has led you to lose trust and confidence in your employer, talk to us first.
Do not resign until you speak to us.

The fastest way is to submit the case form with a short timeline and key documents.
Employee Unfair Dismissal Case Form

Dismissal and resignation

Whether it is a disciplinary meeting, a workplace investigation, or a performance issue, a common scenario is the employer proposing termination and then offering a resignation instead. Our general advice is: do not resign until you have advice.

If you resign, you can weaken your ability to raise a Personal Grievance for unjustified dismissal.

Involve us early and you will usually be in a much better position to achieve a strong outcome.

Settlements and compensation

Where an employer is going to dismiss an employee but offers that the employee can resign, the employee can often take this approach with our help:

1. Do not resign.
2. If the dismissal is unjustified, we will raise a Personal Grievance for unjustified dismissal.
3. We will negotiate with the employer to achieve a settlement before, at, or after employment mediation.
4. The settlement can record that the employee resigned, rather than being fired.
5. We often negotiate a reference or certificate of service.

If settlement is not achieved because of the employer's refusal to negotiate, we then take the case further to the Employment Relations Authority (the ERA).