Constructive dismissal

A constructive dismissal takes place when an employee resigns in circumstances where the employer’s behaviour amounts to a breach of contract so serious that they have no alternative but to resign.

Employees can give full contractual notice before resigning and still claim constructive unfair dismissal, as long as their resignation is in response to the employer’s fundamental breach of contract (section 95(1)(c), ERA 96).

A constructive dismissal has three key elements:

• the employer must have fundamentally breached the employment contract;

• the employee must have resigned in response to that breach; and

• the employee must not have waived the breach (also known as “affirming” the contract) by continuing to behave as if they are prepared to treat the contract as ongoing despite the breach.