Constructive Dismissal

Constructive dismissal - do not resign without advice

A constructive dismissal is a resignation where the employee says they had no real choice but to resign because of the employer's actions. If it is truly a constructive dismissal, it can be treated as an unjustified dismissal personal grievance.

What makes a resignation a constructive dismissal?

The classic NZ categories come from Woolworths. Constructive dismissal can occur where:

• Resign or be dismissed: the employer gives a choice between resignation and dismissal.
• Coercion: the employer follows a course of conduct with the deliberate and dominant purpose of forcing the employee to resign.
• Breach of duty: the employer seriously breaches duty (for example, good faith, safety, fair treatment) and that breach leads the employee to resign.

Where an employee resigns and claims constructive dismissal, the onus is on the employee to show that a dismissal has occurred in substance. That is why the "do not resign" advice is so important.

The biggest trap: employers offering resignation instead of dismissal

A common scenario is a disciplinary meeting or investigation where the employer is heading toward termination, then suggests the employee resign instead. Employees often think resignation "looks better", but legally it can destroy an unjustified dismissal claim because the end of employment can be treated as the employee's decision.

In many cases, the better approach is:

1. Do not resign.
2. If the employer dismisses you, assess whether it can be challenged on process or substance (section 103A test of justification).
3. Raise a Personal Grievance (PG) and negotiate resolution, often through MBIE mediation.
4. If settlement occurs, it can be agreed in settlement terms that employment ended by resignation even if it did not.

Common fact patterns we see

Constructive dismissal arguments often come up where there is a pattern of behaviour or a serious event that makes continued employment intolerable. Examples can include:

• Being told to resign, or being threatened with dismissal unless you resign.
• Bullying, harassment, or humiliation at work, especially after complaints are raised.
• Unjustified suspension or exclusion from work, or being cut off from systems and duties.
• Major unilateral changes (pay cuts, demotion, stripping duties) without lawful process.
• Safety failures where the employer does not take reasonable steps after being told.
• Retaliation after you raise a complaint or ask for help (good faith risks).

Time limits - act quickly

Personal grievances generally must be raised within 90 days of the relevant action or when it came to the employee's notice (whichever is later). With constructive dismissal, the timeline can become complicated (because it can involve a series of events), so delay can be fatal.

Evidence that wins or loses constructive dismissal claims

Constructive dismissal claims are evidence heavy. If you are considering resignation (or you have resigned), gather and preserve:

• Written communications: emails, texts, letters, Teams messages.
• Meeting notes: who attended, what was said, what outcomes were threatened.
• Policies and agreements: employment agreement, disciplinary policy, bullying policy, health and safety processes.
• Complaint trail: proof you raised concerns and what the employer did (or did not do) in response.
• Medical evidence: if health impacts are relevant (GP notes, EAP referral records, ACC, etc).
• Resignation timing: what happened immediately before resignation and why that event was the tipping point.

Resignation letters - when they help and when they harm

If you resign and later claim constructive dismissal, the resignation letter can become key evidence. If you intend to claim constructive dismissal, your letter should clearly record the reasons and complaints and the fact you previously raised concerns.

Your resignation letter (constructive dismissal style) should usually:

• Resign effective immediately (or state clearly why notice is not workable).
• List the complaints and reasons for resignation.
• State when and how you raised concerns previously.
• Request final pay processing.
• Avoid unnecessary praise or thanks that conflicts with your complaint narrative.

Remedies - what you can seek if successful

If a constructive dismissal is established, it is treated as a form of unjustified dismissal. Potential remedies can include reinstatement (where reasonable), reimbursement of lost wages, and compensation for hurt and humiliation. Outcomes depend on the facts and what happened after the resignation (including mitigation and job search).