What Constitutes Constructive Dismissal?
Getting Fired Without Getting Fired: A Constructive Dismissal
By Lucky Moloi
A situation may occur whereby an employee “gets fired without getting fired”. This occurs, for example, when an employee who instead of being a vice president within the company, finds himself/herself as a “special projects manager”. This is another form of a statutory dismissal referred to as constructive dismissal. Constructive dismissal is defined as the termination of the employment contract with or without notice by reason of the employee’s action rather than the employer’s own immediate act. It happens when an employer knowingly or unknowingly placed itself in a position whereby it compels the employee (perhaps through no fault of his/her) into a position of resignation. In other words, it is a situation where employees resign or repudiate their contracts of employment because they are left with no option but to do so by the employer’s conduct. Such a resignation becomes a constructive dismissal case, not only in the eyes of the employee but also that of labour statutory bodies.
Such resignations are deemed to be dismissals even though they may be perceived as an employee’s termination of an employment contract. Such terminations occur because the employer made continued employment intolerable, they are coerced resignations or departures. This means that a constructive dismissal can be proved even when employees simply left the company in circumstances that otherwise could have amounted to absconsion. This is governed by section 186 (e) of the LRA which defines dismissal as meaning “ ….an employee terminated the contract of employment with or without notice because the employer made continued employment intolerable”.
What Constitutes Constructive Dismissal?
To amount to a constructive dismissal, the employee’s resignation must be a response to a breach of employment contract on the part of the employer. This breach of contract can be associated with reducing benefits, the removal of facilities that go with the position, reduced job functions, transfer which is seen as a demotion or punishment, where an employer gives an employee the option of resigning or being dismissed, withholding pay, redefined position descriptions, abusive treatment, short-term lay-off, forced leave absence, etc. Employers, who perpetrate such actions, whether knowingly or unknowingly, run the risk of a constructive dismissal case being referred against them. The law then treats such cases as a form of statutory dismissal against the employer. The employer should, therefore, guard against any action that attacks the root of the contract of employment to avoid such cases. For example, in the case of Van Wyk v Albany Bakeries Ltd & others  12 BLLR 1274 (LC), the applicant resigned after the respondent employer abolished his former post of regional manager and appointed him branch manager without loss of salary or benefits. He claimed that he had been constructively dismissed, and referred a dispute to the CCMA. Though the commissioner erroneously held that the applicant had failed to prove constructive dismissal, the Labour Court held that the commissioner had accordingly misdirected himself by finding that the applicant had not been constructively dismissed. Therefore, the award was set aside and the applicant was awarded compensation equivalent to six months’ remuneration.
In Loubser v PM Freight Forwarding (1998) 7 CCMA 6.13.13 commissioner Loveday warned that “It is important to be cautious in adopting a wide interpretation of what conduct by an employer would constitute constructive dismissal because of the danger of inviting a flood of employees who resign and then repent and want to claim the protection of the Act … On the one hand, it would be a corruption of the Act to adopt a very restrictive interpretation. The definition in section 186 (e) was clearly designed to protect employees who resign in desperation as a last resort because of the unlawful or unfair conduct of the employer that makes a continued employment relationship intolerable. Employers do have the responsibility to avoid acting in a manner that would likely to destroy or undermine the employment relationship…(2003:23). This means that care should be taken of the conduct of the employee and the interaction between both parties in determining the existence of a constructive dismissal. Bell Gully (2003:1) states that it may happen that actions of the employer may not amount to a breach of an express term of the employment agreement sufficient to amount to a repudiation of the agreement. Therefore, the LRA requires that the breach must be so serious that the employee cannot reasonably be expected to continue the contractual arrangement.
Grogan (2001:108) concludes that in making out a case of constructive dismissal, employees who have resigned must generally show that they are subject to coercion, duress and undue influence. The mere fact that an employee had been issued an unreasonable instruction does not in itself justify resignation and a subsequent claim of constructive dismissal, especially if the employee has failed to use the employer’s grievance procedure or some other method by which he or she can seek relief. Nor does a resignation prompted by the rejection of an employee’s request for a voluntary severance package constitute a constructive dismissal. However, where the employee is forced to accept a voluntary severance package, such an employee is held to have been constructively dismissed. Whether or not the employer intends to repudiate the contract is irrelevant. But where employees can reasonably have lodged a grievance regarding the cause of their unhappiness, and fail to do so before resigning, they may be hard put to persuade a court or arbitrator that they had no option but to resign.
A unilateral variation of the contract by the employer will not in itself justify a claim ofconstructive dismissal; the variation must be such as to evince an intention on the employer’s part to repudiate the contract, to warrant the conclusion that the employee could not reasonably be expected to endure the situation, or be such as to go to the root of the employment relationship. If the employer’s conduct renders it impossible for the employee to work, a constructive dismissalwill have taken place. Grogan (2001:110) states that:
“Resignations prompted by a rejection of an employee’s request for a voluntary severance package constitute a constructive dismissal. However, where the employee was compelled to accept a voluntary severance package, there is a case for constructive dismissal. But where employees could reasonably have lodged an internal grievance regarding the cause of their unhappiness, and failed to do so before resigning, they may be hard put to persuade a court or arbitrator that they had no option but to resign”.
That is, it is easy to make an allegation of a constructive dismissal, but it is not easy to prove it. The incidences that make up a constructive dismissal case are complicated and not as clear-cut as one might think. Therefore, a constructive dismissal case is an objective one in that it cannot be determined from the state of mind of the employee alone.
Onus of Proof
Employees who have resigned must generally prove that they were subject to coercion, duress and undue influence. Section 192 of the LRA requires that an employee must prove the existence of aconstructive dismissal, that is, there must be proof that the employer’s conduct made continued employment intolerable. That is, an employee bears the onus to prove the constructive dismissal. Malone (2003:1) states that “the employee must establish more than unreasonable or oppressive conduct on the part of the employer. Whether or not the employee is entitled to terminate the contract is a question of fact to be determined in accordance with contractual principles. The words “entitled” and “without notice” are contractual concepts. An employee is entitled to treat himself as constructively dismissed if the employer is guilty of conduct which is a significant breach going to the root of the contract of employment; or which shows that the employer no longer intends to be bound by one or more of the essential terms of the contract.
The employee must prove that the employer had repudiated the contract, meaning that the employer has indicated an intention to no longer to be bound by its terms. Though each case has to be decided on its own merits, the conduct of the employer in the employment relationship has to be determined as a source of the employee’s resignation. This is important in that not every breach of contract is serious enough to be a repudiatory breach. For example, in Milady’s, a division of Mr Price Group Ltd v Naidoo & others  9 BLLR 808 (LAC), an employee’s over-reaction to management style of which she disapproved was held not to be a ground for claim of theconstructive dismissal. In other words, a breach of a less fundamental term would not entitle an employee to resign and claim constructive dismissal. This so happens because that would not go to the root of the contract.
In sum, constructive dismissal is simply a form of dismissal under the LRA. Whether such a dismissal has occurred is a question of fact. The employee bears the onus of proving constructive dismissal. Employees who resign with the intention of terminating the contract cannot claim relief. However, when employees resign because they have no alternative, the legal consequences are different. While employees claiming constructive dismissal must prove that their work situation had become intolerable, that they would have continued to work indefinitely had the employer not created the intolerable situation, and that they resigned because they did not believe that the employer would rectify the situation, it does not follow that all these elements had to be expressly pleaded.
Test for Constructive Dismissal
Clark (2003:2) says “ it is by no means simple to define any particular act or omission on the part of an employer which would inevitably amount to a breach of the duty of mutual trust and confidence”. Not every shortcoming would fall into this category. Mere bad management of employee relations or even being a bad or uncaring employer will not amount to such a breach. Moreover, tribunals will allow employers to run their businesses as they wish (subject to the employees’ rights), and a bad business decision will not of itself lead to a finding of a constructive dismissal. Clark (2003:2) further states that an employee has a duty to carry out his employer’s instructions (even though he might consider them misguided) and a failure to do so could lead to disciplinary action legitimately being taken against such an employee. In some instances, an employee may succeed in establishing constructive dismissal where a resignation was in response to a series of small breaches that individually might not amount to a repudiatory breach.
Employees should always remember to indicate in writing that the resignation is as a result of the employer’s repudiatory breach. An omission to do this may later prevent an employee from contending this, as constructive dismissal is a two-stage approach. That is, the employee has to prove, first, that it was the intolerable conduct of the employer that led to the termination of contract. If this is proven, then the employer must prove that the dismissal is for a fair reason or that there was no dismissal as alleged by the employee.
Therefore, an employee has to show that: he/she had intended to bring to an end the employment relationship, the working relationship has become so unbearable that he/she could no longer fulfil his/her obligation to work, the situation is intolerable, a period of intolerability justified the termination of employment, and the only reasonable option available was to terminate the contract. These are some of the considerations that should be taken into account by employees and labour related tribunals when dealing with constructive dismissal cases. Though the LRA is silent on time frames of resigning, it is advisable that employees should move promptly in allegingconstructive dismissal. If an employee continues with the duties, such an employee may find it difficult to deny that he/she has accepted or waived the employer’s breach.
Sections 197 and 197a
Albertyn and Loveday (2003:31) note that “getting fired without getting fired” can also occur, in circumstances, where there is a transfer of an employment contract and a transfer in terms of insolvency. In such circumstances, an employee, who terminates the employment contract, must be able to demonstrate that the terms and conditions of employment are substantively less favourable than those that were offered by the previous employer. That is, if a new employer offers transferred employees terms and conditions or circumstances of work that are substantially less favourable, employees may terminate the employment contract and refer the constructive dismissal to the labour related statutory body.
In conclusion, in order for the employee to be in a position to resign and claim constructive dismissal, there must be a “dismissal” recognised under the LRA. In order for such a dismissal to occur four conditions must be met:
- There must be a breach of contract by the employer. This may be either an actual breach or an anticipatory breach i.e. the employer makes it clear that it is going to act in breach of contract,
- That breach must be sufficiently important to justify the employee resigning, or else it must be the last in a series of incidents which justify his/her leaving,
- The employee must leave in response to the breach and not for a different, unconnected reason,
- The employee must not delay too long in terminating the contract in response to the employer’s breach, otherwise s/he may be deemed to have waived the breach and agreed to vary the contract.
When resigning it is essential for an employee to set out the exact reasons for resignation and the breach of contract relied on. If an employee delays in giving the true reason for his/her resignation, his/her later version of events is likely to be challenged. If s/he wishes to keep the option of resigning in response to the breach whilst giving her employer one last opportunity to remedy the situation, he/she may be able to preserve his/her position by following an internal procedure indicating to the employer the grounds on which he/she is entitled to resign and to lay a claim ofconstructive dismissal and to state his/her intention to do so unless the employer takes certain measures to rectify unwanted incidences within a specified period.