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Employment and Migration Blog

Termination v Resignation: When employee disputes lead to unfair dismissal claims

Posted by Lisa Qiu on 3 Nov 2020

It is surprisingly common how often a dispute arises between an employer and employee as to how the employment relationship ended – was it by resignation by the employee, or termination by the employer?

Often, an employee will allege that they were terminated, either directly, or by way of constructive dismissal. This often occurs in situations involving performance management. A constructive dismissal is when an employee alleges that the employer’s conduct was such that the employee felt forced to resign, or had no other choice but to resign, or for some reason, that the termination was not clearly and directly conveyed as a termination, but had the effect of a termination.

Situations where an employee is directed to leave the workplace (such as in the event of a suspension), and is asked to return all company items before they leave the workplace and is blocked from access to the company’s system, are common circumstances where constructive dismissal is raised.

On the other hand, an employer will often allege that an employee resigned when they chose not to return to work, or when they walked off the job, or when they verbally tendered a resignation.

From a legal perspective, what difference does it make?

When an employee voluntarily resigns, they are unable to bring an unfair dismissal claim, which as the name suggests, is a claim brought by an employee who alleges they have been unfairly dismissed. If the way the employment relationship ended is unclear, the employee will need to prove that they were dismissed (either directly or by way of a constructive dismissal) and that they did not resign, or that if they did resign, it amounted to a constructive dismissal as they felt they had no other choice but to resign.

The issue of whether an employee’s resignation amounted to a constructive dismissal, was recently discussed in the case of Sunanda Soni v Berwick Waters Early Learning Centre Pty Ltd [2020] FWC 4149 (7 August 2020).

In this case, Ms Soni was an employee of Berwick Waters Early Learning Centre (the “ELC”). The ELC alleged that there were issues with Ms Soni’s performance, related to being late for work, health and safety issues, gossiping and other work related issues. Ms Soni was placed on a performance improvement plan. After some months, Ms Soni wrote an email to ELC stating that as a result of the mental harassment she received over the previous months, including the performance improvement plan, and the bullying she had faced, that she had decided to resign and was giving ELC her 4 weeks’ notice as required by her employment contract.

Ms Soni then lodged an unfair dismissal claim with the Fair Work Commission, alleging that her resignation should be treated as a constructive dismissal, as she felt the ELC’s actions left her with no other choice but to resign.

In determining Ms Soni’s claim, Deputy President Hamilton, in the opening remarks of his judgment, noted that it would with respect be disappointing if a custom and practice arose of applicants making unsubstantiated allegations of bullying or general protections breaches in response to ordinary employer performance improvement, disciplinary or other action. This would be an abuse of process.

DP Hamilton further noted at [32] that performance improvement discussions could be “unpleasant, but they are common and necessary, and do not constitute bullying or inappropriate conduct”. He determined that there was nothing unfair or unreasonable about the manner in which the ELC carried out their performance discussions with Ms Soni, and therefore, that he did not agree that Ms Soni had no other choice but to resign as a result of the conduct of her employer. Her case was ultimately dismissed.

Lessons for employers

Performance management, even for managers or HR professionals, is never a pleasant experience. If done incorrectly, it can lead to claims of unfair dismissal and stress-related workers compensation claims. However, it’s a necessary part of the employment relationship.

In order to minimise the chance of an unfair dismissal claim, and a claim of constructive dismissal, and to conduct performance management in a manner that is fair to the employee, employers should:

  • ensure employees are aware of the expectations of their role;
  • manage underperformance when it arises by speaking to employees about where they are going wrong in their performance;
  • follow up on performance discussions to make sure the employee is supported in their role and taking steps to address their underperformance;
  • confirm performance discussions in writing;
  • if an employee resigns, make sure you have the resignation in writing and confirm acceptance of the resignation in writing;
  • if an employee is suspended as part of the performance management, only take away company items and restrict access to company systems where there is a good business need to do so; and,
  • refrain from making unilateral decisions about an employee’s employment, that is, make sure you are giving the employee an opportunity to respond to allegations of underperformance before final decisions are being made. This will help to avoid claims that the employee felt they had no choice but to resign and increases the procedural fairness of performance management.

If you need assistance with conducting fair performance management and/or terminations, please don’t hesitate to contact a member of Coleman Greig’s Employment Law Team, who would be more than happy to assist you.

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