Constructive Dismissal NZ: The Test and How to Raise It

Constructive dismissal is when an employee resigns, but the law treats the resignation as if the employer dismissed them. It happens when an employer's conduct leaves the employee with no real choice but to leave.

This is general information about New Zealand employment law, not legal advice. For your own situation, consult a lawyer or your local Community Law centre.

What constructive dismissal means

Ordinarily, a resignation is the employee's own decision and is not a dismissal at all. Constructive dismissal is the exception: it applies where the employer's behaviour makes it impossible, or close to impossible, for the employee to keep working there, so that the resignation is really the employer's doing. Where that is established, it is treated as a form of unjustified dismissal, with the same personal grievance process and remedies.

The three situations the law recognises

A resignation can be treated as constructive dismissal in three main situations:

• A forced choice between resigning and being dismissed. For example, the employer tells the employee to resign or be fired, or threatens disciplinary action unless the employee leaves voluntarily.
• Deliberate pressure to resign. The employer intentionally creates conditions aimed at pushing the employee out, such as repeated unreasonable demands, isolating the employee, or ongoing conduct clearly intended to force a resignation.
• A serious breach of the employer's obligations. The employer seriously breaches the employment agreement, or a workplace legal duty, leaving the employee with no reasonable option but to resign. This is the most common route in practice.

Examples

Examples that can support a serious-breach claim include harassment or bullying the employer knew about and did not address, unsafe working conditions, being asked to do something unlawful, repeated and uncorrected pay errors, or major changes to hours, pay, or duties made without the employee's agreement. Under the other two situations, examples include an explicit ultimatum to resign or be dismissed, or a sustained pattern of conduct clearly aimed at making the employee leave.

Why raising the problem first matters

Before resigning, an employee is generally expected to raise the problem with the employer in writing and give the employer a genuine, reasonable chance to fix it. Resigning immediately, without giving the employer that opportunity, can make it harder to later show that resignation was the only real option. Keeping a record of what was raised, when, and how the employer responded matters if the resignation is later challenged as a constructive dismissal.

How it is pursued

Because constructive dismissal is treated as a form of unjustified dismissal, it is raised the same way: as a personal grievance, generally within 90 days of the resignation or of the events relied on becoming known to the employee. Mediation through MBIE is the usual next step if the matter cannot be resolved directly with the employer, and if that fails, either party can take it to the Employment Relations Authority. See personal grievances for the full time limits and process, and unjustified dismissal for the fair and reasonable employer test the Authority applies and the remedies it can award.

Related employment topics

For the general dismissal test constructive dismissal is measured against, see unjustified dismissal. For the wider picture of employment law in New Zealand, see the employment law hub.