What a worker's €25,000 payout can teach employers about 'constructive dismissal'

The man was demoted after raising concerns about the company’s accounts.

By Derek McKay MD, Adare Human Resource Management

‘CONSTRUCTIVE DISMISSAL’ IS a term that I come across regularly when dealing with conflict between organisations and former employees.

However, there is generally a misunderstanding about what constructive dismissal is and how it is assessed.

Unlike when an employee takes a claim for an unfair dismissal, it is initially up to the worker to prove that their exit was a case of constructive dismissal under the Unfair Dismissals Act.

This is gauged against two specific tests: the ‘contract test’ and ‘the reasonableness test’. Initially, the employee is required to demonstrate a breach against these tests, which is a high bar, before the burden falls on the employer to defend the case.

This is the opposite to an unfair dismissal case, where the burden is automatically on the organisation to prove that a dismissal was fair.

Under the contract test, the employee argues that the actions of their employer show or prove that their boss no longer intends to be bound by the terms of the contract.

For the reasonableness test, the employee argues that although their employer may have acted within the terms outlined in their contract, the actions of the employer are so unreasonable that they are entitled to treat the contract as being at an end.

So while the actions of the employer may not have actually breached any of the conditions of the contract, those actions can still be classified as being so unreasonable that there is justification to the involuntary resignation of the employee.

A good example

The findings in a recent successful constructive dismissals case at the Workplace Relations Commission provide a good example. The complainant had been employed as a floor manager with a company since 2014 on an annual salary of €42,000.

In 2015, the complainant was offered a new role within the company as a duty manager on an increased salary of €55,000, plus a weekly cash payment of €100 for expenses. The terms and conditions were agreed verbally but never confirmed in writing.

Shortly after starting the new role, the complainant had a meeting with senior management from the company. At that meeting, he identified a number of issues including with the business accounts, which showed irregularities relating to rebates.

He stated at the WRC hearing that he was belittled at this meeting and his concerns were not taken on board.

Following that meeting he stated that there was a change in how he was treated within the company and that he was being excluded from management meetings. The agreed expenses of €100 were also not being paid.

In January 2016, a new manager was employed as the new general manager, who was also responsible for managing the complainant.

Later in the month, the complainant was informed that he was under-performing and his salary was cut to €44,000, which he objected to and notified the company of the same by email.

The complainant stated that when he tried to discuss the issue with the owner of the company, he was treated in a demeaning manner, which upset him.

Following a visit to his GP in February, he was certified unfit for work and he undertook a course of counselling. However, after a sustained period of time not working and only receiving social welfare payments, he felt he had to go back to work.

But he felt he couldn’t cope and resigned in June 2016. Upon hearing the case, the WRC found in favour of the complainant and awarded him a total of €25,500.

Redress

There are three options for redress available if it is deemed that an employee has been unfairly dismissed: reinstatement to the position previously held, reinstatement to a different position that would be suitable for the employee, or compensation.

The adjudicator noted that they were satisfied that there was a relationship between the change in how the company treated the employee and the voicing of his concerns.

The adjudicator also noted the issues raised about the cut in salary and accusations of under-performance without the employee being provided with any specific details of the under-performance.

Also noted was the employment of a new general manager prior to the complainant’s ‘review’. From this, the adjudicator concluded the decision to demote the complainant was made in advance of this review.

She found that there was again a connection between the demotion of the complainant and his concerns of financial irregularities. Furthermore, she found that the company breached the complainant’s contract of employment by cutting his salary.

While some of the elements of this particular case may seem obvious from the point of view of the complainant, it is still important to remember that the burden of proof is with the claimant and they must show that their resignation wasn’t voluntary.

Derek McKay is managing director at Adare Human Resource Management. The company will be hosting a Workplace Relations Commission mock adjudication hearing on Tuesday, 17 April.

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