Most people assume that if they resign from their job, they cannot later claim they were dismissed.
New Zealand employment law says otherwise. Under the Employment Relations Act 2000, an employee who resigns can still bring a personal grievance for unjustified dismissal if the resignation was not truly voluntary. This is known as constructive dismissal.
What is constructive dismissal?
Constructive dismissal arises where an employer’s conduct is so unreasonable, or breaches the employment relationship so seriously, that the employee is left with no real choice but to resign. The law treats this resignation as a dismissal in substance, even though the employee was the one who formally ended the employment.
New Zealand courts and the Employment Relations Authority generally recognise three situations where constructive dismissal can arise. First, where the employer gives the employee an ultimatum to resign or be fired, and the employee resigns to avoid the formal dismissal process. Second, where the employer breaches an essential term of the employment agreement, such as unilaterally cutting pay, demoting the employee without cause, or fundamentally changing duties without agreement. Third, where the employer engages in a course of conduct that, viewed as a whole, is so unreasonable that resignation becomes the only sensible response. This third category often covers cases involving sustained bullying, harassment, unfair treatment, or a breakdown in trust and confidence caused by the employer’s actions.
The test the Authority applies
The Employment Relations Authority does not ask simply whether the employee felt upset or frustrated. The test is objective. The Authority asks whether a reasonable employer, in the same circumstances, would have expected their conduct to result in the employee’s resignation. It is not enough that the employee subjectively felt they had no choice. The employer’s conduct must be judged as unreasonable by objective standards, and there must be a genuine causal link between that conduct and the decision to resign.
This means an employee cannot simply resign because a workplace is difficult or a manager is unpleasant. There must be conduct on the employer’s part that goes beyond the ordinary rough and tumble of work life and crosses into a breach of the good faith obligations owed under section 4 of the Act, or a breach of an express or implied term of the employment agreement.
Common triggers seen in practice
In practice, constructive dismissal claims often follow patterns such as unilateral changes to hours, pay, or role without genuine consultation, employers ignoring or mishandling bullying or harassment complaints, employers applying disciplinary processes so unfairly that the outcome is predetermined, and employers making working conditions deliberately intolerable to avoid a formal restructuring or dismissal process. Restructuring situations require particular care. An employer who uses a sham restructuring to remove an employee without following a fair process risks a constructive dismissal finding on top of an unjustified dismissal claim.
Why this matters for employers
Employers should not assume that accepting a resignation ends their exposure. If the resignation was engineered, or followed a serious failure to act fairly, the employee may still bring a personal grievance. Employers reduce this risk by following fair process in every disciplinary and restructuring situation, addressing complaints of bullying or harassment promptly and thoroughly, communicating any changes to pay, hours, or duties clearly and with genuine consultation, and documenting the reasoning behind employment decisions.
Why this matters for employees
Employees who feel forced out of a job should be cautious before resigning. Where possible, it is worth raising concerns in writing, seeking advice before resigning, and keeping records of the conduct relied upon. Once a resignation is given, the window to act is short. A personal grievance for unjustified dismissal, including on the basis of constructive dismissal, must generally be raised with the employer within 90 days of the action giving rise to it, under section 114 of the Employment Relations Act 2000.
Remedies
If a constructive dismissal claim succeeds, the remedies available are the same as for any unjustified dismissal. These can include reimbursement of lost wages, compensation for humiliation, loss of dignity, and injury to feelings under section 123, and in some cases reinstatement, although reinstatement is less commonly sought or ordered in constructive dismissal cases given the circumstances that led to the resignation.
Getting advice early
Constructive dismissal cases are highly fact-specific. The outcome often turns on the sequence of events, what was said and by whom, and whether the employer’s conduct can be objectively characterised as unreasonable. Whether you are an employer trying to manage a difficult exit fairly, or an employee who believes you were forced out of your job, getting advice before taking further steps can make a significant difference to the outcome.
This article provides general information only and is not a substitute for legal advice about your particular circumstances.