Constructive Dismissal in Australia: How to Deal With it

by WRA

Constructive dismissal

Constructive dismissal is a term often used in the legal world, but what does it actually mean? In this ultimate guide, we’re going to discuss everything you need to know about constructive dismissal law in Australia, along with your constructive dismissal rights – if you have been affected and how to seek legal advice and support.

What is constructive dismissal?

First, it’s important to understand what constructive dismissal is and how it can occur.  The starting point is to know and understand that there is no strict legal definition of “constructive dismissal.”  That is – the term is not defined in the Fair Work Act or the Industrial Relations Act,  which are the main pieces of Commonwealth legislation covering this area of the law. 

A constructive dismissal is said to occur when an employer makes a significant change to an employee’s existing working conditions without the employee’s consent. The changes are so severe that they are considered tantamount to a breach of contract. This can include changes to job duties, hours of work, pay, or location. 

Put simply a constructive dismissal happens when an employer makes things so uncomfortable, unsafe, or unacceptable that the employee is left with no alternative but to resign, sometimes called – “forced resignation.”

There are also various elements that go into constructive dismissal law, such as whether the employer gave the employee a reasonable chance to agree to the changes. This is where things can become complex and confusing from an employee’s point of view. But this is not to be confused with a voluntary resignation.

Difference between resignation and constructive dismissal

Where constructive dismissal and resignation differ is that, with resignation, the employee makes the decision – voluntarily to leave their job, whereas, with constructive dismissal, it is the employer who has essentially forced the employee out by making changes that the employee cannot reasonably be expected to agree to and thus make it impossible to accept. 

When an employee faces this type of situation, it can be incredibly stressful and daunting. Not only are you dealing with the changes that have been made to your job, but you also have to navigate the legalities of it all. So, in this guide, we’re going to take you through everything you need to know about constructive dismissal law in Australia and how to get help to put things right again.

When it comes to fighting constructive dismissal, there are a few different avenues that you can take in order to seek justice. But first, you should be fully aware of your rights as an employee in Australia. Knowing that a forced resignation is unjust and against the law will help you form a strong argument and seek out legal help. Sadly, a lot of employees don’t understand their rights when it comes to constructive dismissal and simply accept defeat.

Constructive dismissal Australia

Constructive dismissal laws

Australian law protects employees from unfair dismissal in two ways. The first is the unfair termination provisions outlined in the Fair Work Act 2009. This makes it unlawful for an employer to terminate an employee’s employment unless it is for a valid reason, such as serious misconduct or poor performance. In this case, the employer must provide evidence to validate the dismissal.

The second way is where employees are protected from harsh unjust or unreasonable treatment by an employer which forces the employee to resign because they cannot accept such treatment.  As indicated above – this is known as the “constructive dismissal” path. 

If you believe that you have become the victim of constructive dismissal, then you can make a claim for unfair dismissal with the Fair Work Commission. You will need to show that you have been unfairly treated by your employer to such an extent that you had no alternative but to resign your position.  You will also need to show that you have suffered financial loss.

These laws protect employees who meet the following criteria:

  • Work for a national system employer (not a state or local government agency).
  • Have worked for at least the minimum period of employment (6 months for permanent and 12 months for part-time/casual employees).
  • Earn less than the high-income threshold (currently $153,600 pa).
  • Make an application to the Fair Work Commission within 21 days of job loss.

Constructive dismissal examples

Here’s a recent example of a constructive dismissal claim which clearly demonstrates how serious and significant the implications can be for employees:

Ahmed was employed as the manager of a car sales yard in Sydney for 11 months when he realized his employer was not deducting PAYG tax from his salary and was not paying his superannuation.  Around the same time, Ahmed found a series of documents showing that odometers on vehicles being sold at the car yard were being consistently wound back. Ahmed knew that as the manager of the sales team, he would be held responsible for any odometer offenses and so he immediately resigned from his position.  

Ahmed was “constructively dismissed” because he had no alternative but to resign because of the taxation, superannuation, and odometer fraud occurring.  Ahmed’s case was settled in the Fair Work Commission, including the payment of compensation.

Constructive dismissal claim

If you are thinking of bringing a constructive dismissal claim, here’s how the process works. You will first need to lodge a claim with the Fair Work Commission (FWC) within 21 days of your constructive dismissal (forced resignation).  Your employer will be served with a copy of your claim by the FWC and shall be called upon to respond in writing.  This is followed by a conciliation (or mediation) – usually conducted by telephone with an FWC conciliator and if a settlement cannot be reached – the matter is set down for a hearing.  The majority of cases settle at the conciliation stage, but in the event that a hearing is required – professional representation can be approved by the FWC, and it is at this point that a skilled and experienced employment lawyer can make all the difference. 

If you are successful in your claim, the Fair Work Commission can order your employer to reinstate you to your job or pay you compensation for the loss of your job.

Constructive dismissal time limit

Time limits in employment law are very strict.  The time limit for lodging a claim for constructive dismissal is 21 days from the date of your forced resignation. This means that you will need to act quickly if you believe that you have been constructively dismissed. Once you have lodged your claim, your employer will be given 14 days to respond.

What is the required evidence for constructive dismissal?

When you lodge a claim for constructive dismissal, you will need to provide evidence to support your claim. This can include any written communication between you and your employers, such as emails or letters. You will also need to provide evidence of the financial loss you have suffered as a result of the constructive dismissal. This can include payslips or bank statements. You should also be prepared to give a detailed account of the events leading up to your resignation and provide details of any witnesses who can testify for you.

What are successful constructive dismissal claims?

A successful claim for constructive dismissal will usually involve proof of the following elements:

  • You were employed by an employer for a minimum of 6-12 months.
  • You resigned because you had no alternative (forced resignation).
  • The employer acted in a way that was detrimental to your employment.
  • You were not earning more than the high-income threshold ($153,600 pa).
  • Your claim was made to the FWC within 21 days of the constructive dismissal.
  • You have suffered financial loss as a result of the constructive dismissal.

Constructive dismissal compensation

What compensation for constructive dismissal

If you are successful in your claim for constructive dismissal, the Fair Work Commission can order your employer to reinstate you to your job or pay you compensation for the loss of income. The amount of compensation you can receive upon a successful claim will depend on a number of factors, such as the length of your employment, your conduct and performance record, the size of the employer’s enterprise, and the length of time you remained out of work (up to a maximum of 26 weeks).

What is the maximum compensation for constructive dismissal?

The maximum amount of compensation that you can receive for constructive dismissal in Australia is calculated on the basis of 26 weeks’ salary at the level at which you were remunerated at the time of the constructive dismissal. 

Legal advice constructive dismissal

Here’s some constructive dismissal advice for employees looking for justice. 

It is always best to seek professional advice before commencing litigation of any kind.  Employment law is no different, and the law surrounding constructive dismissal is complex and can be difficult to navigate. A skilled employment lawyer will be able to advise you on the strength of your claim and the best course of action to take. They will also be able to help you gather the evidence you need to support your claim, as well as negotiate and advocate for a just outcome in your case.

If you have been constructively dismissed from your job, you should seek professional advice as soon as possible to discuss your options because the 21-day clock will be ticking. 

Constructive dismissal lawyer

When choosing a lawyer to represent you in a claim for constructive dismissal, it is important to choose someone who has experience in this area of law. They should also be familiar with the Fair Work Commission and the Industrial Relations Commission procedures.

Work Rights Australia is not a law firm.  We are a leading Employee Rights Advocacy Service, providing personal and specialized service delivered by industry professionals.  We have a dedicated and independent panel of expert employment lawyers, whom we regularly rely on and refer our clients to for high-quality and good-value legal advice and support. 

If you think you have been constructively dismissed, contact us today at 07 3303 0127 or send our client support team an email: