Constructive dismissal: Easy to claim, difficult to sustain

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It was reported in the NewsDay issue of January 13, 2011 that a dairy company had been ordered to compensate a former employee to the tune of $82 000 for constructive dismissal.

The former employee claimed that he had been demoted, underpaid and subjected to numerous disciplinary hearings on allegations of poor performance causing him to suffer from illnesses induced by work-related stress.

The Herald of August 5, 2011 also reported the case of a former city treasurer who won his case at the Labour Court for constructive dismissal.

He had allegedly been demoted to the position of finance director and stripped of his normal duties. As compensation for his “suffering”, the city father demanded a hefty $2,8 million and a top-of-the-range vehicle, among other things.

Elsewhere, former England manager Kevin Keegan lodged a successful claim of constructive dismissal against Newcastle United.

The Football Association (FA) of England also faces a potential claim of constructive dismissal after Fabio Capello recently resigned as England manager.

Capello may argue that by stripping John Terry of the captaincy, the FA undermined him by eroding the trust and confidence of his team.

But what is constructive dismissal?

Section 12B(3)(a) of the Labour Act, Chapter 28:01 considers constructive dismissal to have taken place “if the employee terminated the contract of employment with or without notice because the employer made continued employment intolerable”.

Put in another way, constructive dismissal means any action on the part of the employer which renders the continuation of the employment relationship unbearable for the employee — to such an extent that the employee is left with no other option but to resign.

The employer does not actually dismiss the employee, but the employer’s conduct must be such that no reasonable employee can be expected to put up with it.

Constructive dismissal can take place in a number of ways. The employer can directly or indirectly solicit the employee’s resignation by suggestion or even intimidation.

The High Court case of Fonda vs Mutare Club (1989) is a good example. Fonda was employed by Mutare Club as a manager.

He incurred shortfalls in the stocks of liquor under his control. In considering evidence, the court noted that Fonda had been told to “resign or be fired”.

The court referred to both English and local case law and determined that Fonda had in fact been constructively dismissed.

Constructive dismissal can be through an unfair transfer, sexual harassment or setting up impossible to reach targets, criticising or undermining a superior in front of subordinates, verbal abuse or unilateral withdrawal of benefits.

Persistent delayed wages, which is increasingly becoming commonplace these days can be the basis for a constructive dismissal claim.

However, the employer will be vindicated if they can show that failure to pay salaries is due to cash flow problems brought about by circumstances beyond their control.

Constructive dismissal can be through unfair disciplinary action. Some employers, for various reasons, suddenly decide that a particular employee has to go because he or she “is no longer suitable”.

In a 1997 South African case of Pretoria Society for the Care of the Retarded vs Loots, it was found that the employer had rendered the working environment intolerable for the employee by, among other things, “throwing the book at her”, finding her guilty of trumped-up charges, humiliating her by publishing the news of her final written warning to the parents of inmates, and depriving her of keys.

The employer was found guilty of constructive dismissal. Unilaterally changing the conditions of employment of an employee can also lead to constructive dismissal claims.

For instance, if you make an employee perform demeaning tasks, such as requiring a finance director to perform the duties of an accounts clerk would be a fundamental breach of contract and if they resign, a constructive dismissal has taken place.

In labour law, where a person is employed to do certain work and is thereafter made to perform tasks of a menial nature, such treatment may amount to constructive dismissal, unless the employee has been demoted in terms of a registered employment code of conduct.

The resignation of an employee in order to avoid a disciplinary hearing would not necessarily constitute constructive dismissal.

The 1991 High Court case of Mhini vs Richardson is a case in point. Mhini was employed as a mine secretary.

An audit revealed that he had committed some financial irregularities. It was then decided to terminate his employment.

Before proceedings against him could commence, Mhini tendered his resignation.

He set out, at length, his reasons for resignation, but nowhere in that letter did he allege that he was forced into resigning.

The court determined that Mhini had resigned of his own volition and dismissed his application for lack of merit.

An employee who contemplates bringing a claim of constructive dismissal against their employer faces considerable risk.

In the first place, the employee must first resign from their job. However, should such employee be unable to prove their case, the courts are likely to treat such termination of employment as ordinary resignation as opposed to constructive dismissal.

When determining whether a dismissal is indeed a constructive dismissal, the courts will look into the intentions behind a letter of resignation before coming to the conclusion that the employee was dismissed.

In Chabeli vs CCMA & Others (2009), an employee claimed to have been constructively dismissed, but did not give any such hint in his letter of resignation.

Only as an afterthought did he allege that he had resigned because the employer had made his employment intolerable. The claim was thrown out.

Where the courts determine that the employer’s conduct amounts to constructive dismissal, they can order reinstatement of the employee, if such relief is appropriate.

However, because the relationship in most cases would be such that the two parties can no longer work together, the courts will order payment of damages.

In constructive dismissal, the burden of proof lies with the employee not with the employer. This is no easy task.

The employee must prove that the employment relationship was no longer tenable and that he or she had exhausted all internal procedures in an effort to rectify the situation before resorting to resignation.

If an incident takes place only once and the employer tried to rectify it, that single incident cannot be sufficient to render the employment relationship intolerable.

Many cases of constructive dismissal referred to the courts have also not succeeded because applicants rely on perceptions to support their claims instead of hard evidence.

On the part of employers, constructive dismissal is a potentially very tricky area of our labour law. There are no hard and fast rules.

Each case will be judged on its own merits.

Employers should seek professional advice from their human resources managers, labour lawyers or consultants on matters that may result in potential claims of constructive dismissal.

Isaac Mazanhi is a labour analyst. He writes in his personal capacity. He can be contacted on email: imazanhi@hotmail.com