What is Constructive Dismissal?

May 4, 2023

Constructive dismissal describes the situation in which an employer's action or inaction causes an employee’s job or workplace to become so intolerable that the employee feels they have no option but to resign. 


A constructive dismissal may occur where:


1.  The employer gives an employee the choice between resignation or dismissal; or 

2.  The employer follows a course of conduct with the deliberate purpose of inducing an employee to resign; or

3.  The employer breaches their obligations to the employee, to such an extent that it leads the employee to resign.[1]


Category 1 is the most obvious instance of constructive dismissal and often involves an explicit ultimatum. 


Category 2 requires proof of intention on the part of the employer and a conscious decision to act in a way to induce a resignation.[2]  This can be a course of conduct that develops over a period of time.   


Category 3 occurs where “the breach of duty by the employer [is] of sufficient seriousness to make it reasonably foreseeable by the employer that the employee would not be prepared to work under [such] conditions: in other words, whether a substantial risk of resignation was reasonably foreseeable, having regard to the seriousness of the breach.”[3].   This is a broad category and unlike the first two, the employer does not need to intend that the employee resign.


A 'category 3' case was recently decided in the Employment Relations Authority, Price v Pinevale Farms Ltd [2023] NZERA 45.


Ms Price commenced work at Pinevale Farms as a relief milker.  Over the following months, the role expanded to include general farm work and wider milking duties and Ms Price moved into accommodation on the farm. 


The parties never entered into a written employment agreement and the relationship between the employer and employee became fractured.


Eventually Ms Price resigned citing various reasons in her resignation letter including that:


a.  She was not provided with an employment agreement despite her repeated requests;

b.  She was not provided with regular days off;

c.  The roster was changed without agreement;

d.  The employer did not increase pay in line with extra hours worked;

e.  The employer failed to provide paid holidays and appropriate remuneration for public holidays she did work; and

f.  Her employer’s treatment of her such as lowering her hours and then complaining about a lack of work completed.


Ms Price was successful in the Employment Relations Authority and was awarded $20,000 as compensation for hurt and humiliation and over $36,000.00 in unpaid wages and holiday pay.  Interest was awarded on the outstanding wages and holiday entitlements.


Each scenario will be fact-specific and requires careful examination of the conduct involved.  The categories of constructive dismissal are not closed and may encompass behaviour not referred to above.  


In each case, the employee must demonstrate that the only course of action left open to them was to resign and that this was caused by the employer’s action or inaction.


Constructive dismissal will frequently give rise to a personal grievance claim.  Strict time limits apply.  The employee has 90 days from the date the conduct causing the grievance occurred, or in some circumstances the date when their attention was drawn to it, to raise a personal grievance.


If you think that you may have grounds to raise a personal grievance on the basis of constructive dismissal or are an employer and require assistance to respond to such a claim, contact one of our experienced lawyers on employment.law@becker.co.nz for guidance on how best to proceed and to obtain clear advice on your legal position.


Nina Becker

Staff Solicitor


Disclaimer: The information contained in this article is general in nature and not tailored to your personal circumstances.  It is only current as at the date posted and should not be relied upon as legal advice.  If you require legal advice, please contact us for further assistance. 



[1] Auckland Shop Employees IUOW v Woolworths (NZ) Ltd [1985] 2 NZLR 372 (CA), (1985) ERNZ Sel Case 136 at 139.

[2] Chief Of New Zealand Defence Force v Darnley [2022] NZEmpC 4 at [13].

[3] Auckland Electric Power Board v Auckland Provincial District Local Authorities Officers IUOW(Inc) [1994] 2 NZLR 415, [1994] 1 ERNZ 168 (CA) at [173].