Forced Terminations & Constructive Termination
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An Unfair Termination claim can take immense time for those who have not done it before. That time and your claim can go to waste if it is not lodged the right way within the given timeframe of 21 days. We can lodge an unfair termination claim the right way, Maximizing your chance of getting the largest compensation you deserve.
What is a Constructive Termination?
Test for Constructive Termination
In establishing whether an employee has been forced to resign, the employer must have taken action with the intent to bring the relationship to an end or that has that probable result. In the words of the full bench in O’Meara v Stanley Works Pty Ltd, adopted in Bupa Aged Care Australia Pty Ltd v Tavassoli, the test is whether the employer engaged in conduct with the intention of bringing the employment to an end or whether termination of the employment was the probable result of the employer’s conduct such that the employee had no effective or real choice but to resign. Similarly, the Australian case of Mohazb v Dick Smith Electronics Pty Ltd (No 2), states that “an important feature is that the act of the employer results directly or consequentially in the termination of the employment and the employment relationship is not voluntarily left by the employee. That is, had the employer not taken the action it did, the employee would have remained in the employment relationship”.
For example, an employee resigned after having been paid under half of what he was owed in wages over a period of 4 months. This was held to be a forced termination due to the conduct of the employer and thus constituted a termination by the employer
Confusion Between Termination & Resignation
If a termination is given in the heat of the moment or under extreme pressure, special circumstances may arise. In these circumstances, employers may be required to allow a reasonable amount of time to pass before they treat the employees’ ‘resignation’ as an actual termination. For instance, an employee and their employer have a heated and angry discussion in which the employer believes the employee resigned but the employee believes they were terminated. The employee continues to present for work as they were under the belief that they had to work out the notice period for their termination. In these circumstances, the employee is found not to have resigned as they did not demonstrate an intention to not be bound by their contract of employment.
In addition, employers may have a duty to confirm the intention to resign, if during that time, they are put on notice that the termination was not in fact intended. For instance, if an employee notifies their employer of a future intention to resign whilst the employee was distressed and unwell, it has been held that this is not an effective notice of resignation. As a result, this constitutes a termination of employment at the employer’s initiative.
If an employee is demoted and this demotion involves a significant reduction in duties or remuneration, this can also constitute termination despite the employee remaining employed by the employer. However, if the employee’s contract or industrial instrument contains an express term allowing demotion without termination, then any demotion will not amount to a termination at the employer’s initiative.
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Is the constructive termination harsh, unjust or unreasonable?
1 Aforementioned, if an employee is forced to resign and can successfully prove this is a direct result of the employer’s conduct, this will constitute a termination. If satisfied that the employee has been terminated, the employee can make an unfair termination claim in the Fair Work Commission. In order to qualify for an unfair termination, the employee must have completed at least the minimum employment period with the employer. The minimum employment period is 6 months continuous service at a particular time, for non-small business employers. If the employer is a small business, which employs less than 15 employees at the relevant time, the employee must have completed at least 12 months of continuous service at the particular time.
2 Despite the employees’ eligibility to make an unfair termination claim after establishing their forced termination constitutes termination under the FW Act, the employee would need to establish that the termination was harsh, unjust or unreasonable. In Grundy v Brister and Co, the Fair Work Commission found that the employer had forced the employee to resign and that the employee was therefore constructively terminated after a resignation letter was prepared by the employer and the employee was required to sign it. However, when assessing whether this constructive termination was unfair, the Fair Work Commission held that the termination was not harsh, unjust or unreasonable as the employees engaged in abusive behaviour and had a threatening attitude towards fellow employees. Although the Fair Work Commission noted procedural failings, such as preparing the resignation letter for the employee, the Commission held this did not outweigh the seriousness of the employee’s misconduct.
3 When assessing whether a constructive termination is harsh, unjust or unreasonable, the Fair Work Commission will look at whether there was a valid reason for the termination which relates to the employees’ capacity or conduct, whether the employee was notified of this reason, whether the employee was given any opportunity to respond to that reason, whether there was any unreasonable refusal by the employer to allow the presence of a support person for any discussion relating to the termination, whether the employee was warned about unsatisfactory performance prior to the termination if this was the reason for the termination, the degree to which the size of the employer’s enterprise would likely impact on the procedures followed in making the termination, the degree to which the absence of dedicated human resource manager specialists or expertise in the employer’s enterprise would be likely to impact on the procedures followed in the termination and any other matters the Commission considers relevant.
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Lodging an Unfair Termination Application for Constructive Termination
If an employee believes they have been constructively terminated and the termination was harsh, unjust or unreasonable, the employee can lodge an Unfair Termination (Form F2) with the Fair Work Commission. An unfair termination application must be lodged with the Commission within 21 days after the termination takes effect and the Commission may allow a further period for lodgement in exceptional circumstances. Once an application is lodged, the Fair Work Commission will set the matter down for a conciliation conference, a private proceeding conducted by an independent conciliator. This conference is an informal method of resolving an Unfair termination dispute in which an independent conciliator will assist the parties in exploring options for resolution and help them to reach an agreement without the need for a formal hearing or court proceedings. As constructive termination claims may form the basis of a jurisdictional issue, a jurisdictional hearing can occur before or after conciliation. A jurisdictional hearing is a formal process by which a member of the Commission will make a decision as to whether the Commission can deal with the unfair termination case. This process involves the parties to the matter making submissions, giving sworn evidence and provides an opportunity to challenge or cross-examine the other party’s evidence. In regards to constructive termination, the jurisdictional hearing will assess whether the employee has been forced to resign and thus constructively terminated, in order to qualify for an unfair termination application.
Compensation may be awarded to an employee who was unfairly terminated if the Fair Work Commission is satisfied that reinstatement is inappropriate. Compensation in this form is designed to compensate unfairly terminated employees in lieu of reinstatement for losses reasonably attributable to the unfair termination. As a result, compensation cannot be awarded for shock, distress or humiliation. When determining the amount of compensation that may be awarded, the Fair Work Commission will take into account the employees’ length of service, the remuneration the employee would have received, or would have been likely to receive, if they had not been terminated, the efforts of the employee to mitigate the loss suffered because of the termination, such as looking for alternative work, the amount of remuneration earned by the employee from employment or alternative work during the period between the termination and making the compensation order. The compensation cap for an unfair termination claim is the lesser of the amount of remuneration received by the person, or that they were entitled to receive (whichever is higher) in the 26 weeks before the termination, or half the amount of the high income threshold immediately before the termination.
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