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What Is Constructive Dismissal?

Published 10 Jun 2013

What is constructive dismissal?

The Employment relationship may be terminated through resignation. This is done by the Employee, who usually gives a written notice to the Employer in accordance with the terms stipulated and agreed upon in the Employment Agreement.

It should be noted that just because an Employee resigns it does not necessarily preclude the Employer from any liability. This is due to the possibility that the Employee being constructively dismissed.

Constructive dismissal can be where the Employee is pressured to resign as a result of the Employer’s conduct, action, or words used.

There is no statutory definition for constructive dismissal however, previously decided cases provide a helpful guide. In Auckland etc Shop Employees' etc IUOW v Woolworths (NZ) Ltd it was held that constructive dismissal includes situations where:
  • The Employer gives the Employee a choice between resigning and being fired;
  • The Employer embarks on a course of conduct with the purpose of coercing the Employee to resign; or
  • Where the Employer’s breach of a duty leads the Employee to resign.
Although not every breach is so serious that it can sufficiently justify a claim for constructive dismissal.

The Employee bears the burden of proving that he or she was constructively dismissed. The Employer would then respond to the allegations and must show that its actions, and how they acted, were what a fair and reasonable Employer could have done in all the circumstances at the time.

Both parties are required to deal with each other in good faith throughout the employment relationship.

Employees who believe that they have grounds for constructive dismissal may raise a personal grievance against the Employer and, if proven, can be costly for the Employer.

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