Unfair Dismissal and Constructive Dismissal: Resignations Aren’t the End

Unfair dismissal claims are no longer confined to clear employer-initiated terminations. The shift our consultants are observing most frequently is constructive dismissal: unfair dismissal applications from employees who resigned, on the basis that the employer’s conduct effectively forced them to leave.

The framework sits at section 386(1)(b) of the Fair Work Act 2009 (Cth). The threshold is not theoretical — it is being tested regularly. The triggers tend to be things employers treat as routine: a formal performance management process, a change to reporting lines, a breakdown in communication, or a perception — rightly or wrongly — that the process was not run fairly.

One of our senior consultants recently dealt with a matter that illustrates the risk. An employee received a written warning, acknowledged the concerns in the meeting, then disputed the warning in writing. They took stress leave, exhausted personal leave, and moved straight into three weeks of pre-approved annual leave. On the day they were due back, they resigned. The business waived notice and paid it out. They still received an unfair dismissal claim.

The lesson is not that the employer did something wrong. It is that constructive dismissal claims can follow even where the employer has acted reasonably. How a process unfolds over time — and how it is perceived — is what creates the exposure.

General Protections: The Reverse Onus Problem

General protections claims are rising, particularly following performance management, disciplinary processes, and situations involving employee complaints. The risk profile is distinct from unfair dismissal and catches employers off guard more than almost anything else our team deals with.

Under Part 3-1 of the Fair Work Act, employees can allege adverse action for exercising a workplace right — raising a concern, querying pay, taking personal leave, making a complaint formal or informal. The critical element is the reverse onus of proof. In general protections claims, the employer must prove that the action taken was not for a prohibited reason. The employee does not need to prove the employer was wrong — the employer must prove it was right.

Even where performance concerns are entirely legitimate, gaps in documentation or a poorly structured process give the employee the foothold they need. This is a risk our team manages with clients regularly.

Stop Bullying Applications: An Emerging Picture

Stop bullying applications under Part 6-4B of the Fair Work Act have always been available. Until recently, they were genuinely uncommon. Our team is now seeing them at a frequency that signals a genuine change.

What is changing is not the law — it is the willingness of employees to use it. Employees who would previously have raised concerns internally are going directly to the Commission. Expectations around psychological safety are higher than they were five years ago. Employees are more aware of their rights, and their tolerance for unresolved conflict is lower. Management styles that went unchallenged a decade ago are now being tested formally.

Why This Is Happening Now

It would be unrealistic to look at this trend without acknowledging the economic environment driving it. Cost-of-living pressure is real, and claims are partly functioning as a financial mechanism — particularly around the time employment ends. The FWC process has no filing fee, no requirement for legal representation, and is genuinely easy to access. Defending a claim — in time, legal costs, and management distraction — is a different matter.

The practical reality is that it often costs more to fight a claim than to settle it, regardless of the merits. That creates conditions where claims can be pursued not because they are strong, but because the settlement economics work. Volume is also putting pressure on the Commission — shorter conference windows and less time to resolve before escalation.

For NSW employers above the $30,000 workers compensation premium threshold — the experience-rated bracket — the exposure compounds. When the same event triggers both an FWC claim and a psychological injury workers compensation claim simultaneously, the business is managing two separate proceedings with two separate cost profiles in parallel.

What Employers Must Do

The structural factors driving this increase — economic pressure, regulatory accessibility, shifting expectations — are not going to resolve on their own. What employers can control is how well-prepared they are.

1. Formalise your performance management process. Structured, consistent, documented at the time — not reconstructed after the fact.
2. Address issues early. Informal conversations and extended benefit of the doubt create exposure. Early, structured intervention reduces the likelihood of claims arising later.
3. Train your leaders in delivery. The legal risk comes as much from the conversation as from the decision. Poor delivery is one of the most common triggers our team sees.
4. Do not assume a resignation ends your exposure. A resignation following a formal process or warning should be assessed for constructive dismissal risk before you respond.
5. Treat every complaint as a risk indicator. An informal concern, dismissed too quickly or handled poorly, can later underpin a general protections claim.

Getting Advice

A reactive approach to FWC claims is no longer sufficient. Employers who invest in structured processes, capable leaders, and early intervention will be better placed to manage both their legal exposure and their commercial costs.

If you are an On Demand HR member, this is what your membership is for. Call us before your next formal action. We will look at the situation across all the relevant risk dimensions and help you make the right call.

If you are not yet a member, we offer an initial conversation at no cost. Reach us at advice@ondemandhr.com.au or visit ondemandhr.com.au.