Constructive dismissal claims can be costly

By Scott Wilson, Partner & Summer Pringle, Solicitor

Employers might heave a sigh of relief when a worker resigns in difficult circumstances. But while it seems that a problem has been solved, an even bigger one may be looming.

Take the recent case of Chen v Aaron & Coma Limited, where Mr Chen successfully claimed he was unjustifiably dismissed following a heated argument with his employer.

Mr Chen was employed as a noodle chef and worked 10 or 11 hours a day, seven days a week. After working at the noodle shop for a month, Mr Chen discovered that he was being paid less than the minimum wage. He talked to his employer, Mr Shui, about his hours and wages but no change occurred.

A few months later Mr Chen again raised the issues of his hours, working conditions and tax arrangements with Mr Shui. This resulted in a heated exchange. The Police were called and after a discussion with them, Mr Chen went home.

The next day he rang Mr Shui to ask for a few days to calm down and decide whether to continue working for the noodle shop. Mr Shui refused and told him: “Don’t let me find you. If I find you I will cancel your visa and send you back to China”.

Mr Shui later claimed that Mr Chen quit his job of his own volition. The Employment Relations Authority found otherwise and awarded Mr Chen $9,375 in lost wages and $8,000 in compensation for humiliation, loss of dignity and injury to feelings.

Where issues are raised about potential breaches of obligations, an employer should investigate the complaints, and if/where appropriate, remedy any possible wrong doing. Sweeping the problem under the carpet in the first instance, could lead to a costly outcome down the track, as the Chen case illustrates.

Over the years the Courts have established some broad principles for this type of claim and noted that an employee can claim to be dismissed, even though they resigned when:

They are given a choice between resigning or being dismissed;
An employer has followed a course of conduct with the deliberate and dominant purpose of coercing an employee to resign; and/or
A breach of duty by the employer causes an employee to resign.

The case of Mitchell v Blue Star Print Group (NZ) Limited is a good example of an employee successfully claiming he was constructively dismissed because his employer breached its obligations under the Health and Safety in Employment Act 1992.

Mr Mitchell claimed to have suffered from back and arm pains from his heavy work load operating a guillotine. He reported the injuries to his employer and sought treatment. His employer was notified of the workplace injury claim.

Mr Mitchell also raised concerns with his employer about his struggle to keep up with the demands of the job, his lack of tea breaks and having to absorb the work of a co-worker reassigned to other duties. He gave his employer 14 days to remedy the issues.

He then went on sick leave for three weeks but when he returned no changes had been made. He blacked out on his second day back at work, hitting his head on the guillotine. When he came to, he filled out an accident report and told a co-worker what had happened. He decided to leave work and tried to drive home but blacked out again and had an accident.

In finding that he had been unjustifiably constructively dismissed, the Court ruled that Mr Mitchell’s health problems were caused by the employer and as such, the employer had breached its obligations under the Health and Safety in Employment Act and failed to take all practicable steps to provide a safe work place. The Court held the breaches by the employer were serious and it was entirely foreseeable that the employee would resign as a result of them. Mr Mitchell was awarded $10,000 in compensation.

He attempted to take his grievance to the Court of Appeal and then to the Supreme Court but in September this year the Supreme Court rejected his further claims which included a claim for $400,000 in exemplary damages.

These cases demonstrate that employers should take employees’ concerns seriously and respond to them appropriately. If an employer’s actions or words strongly tend to induce the employee to resign, the result can be a costly constructive dismissal claim by the employee.

Disclaimer: the content of this article is general in nature and not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose.

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