Two recent decisions of the Fair Work Commission have provided guidance on when a resignation may be considered ‘forced’, and so a dismissal at the employer’s initiative.
One of these cases involved a situation where the employee was refused a discretionary bonus, while the other involved an employee being required to make repeated requests for flexibility arrangements in accordance with the employer’s policies.

In the first case, the employer was found to have dismissed the employee, while the employee in the second case was unsuccessful in establishing that they had been forced to resign.

The unpaid bonus case

In the matter of Samantha Gurrier-Jones v OSM Australia Pty Ltd:

(a) An employee was promoted prior to taking a period of parental leave;
(b) Whilst on parental leave, the employee was denied a discretionary bonus worth approximately $22,050.00 (15% of her salary), notwithstanding that:

• the bonus was awarded to other eligible employees;
• there was nothing to suggest that the employee had not satisfied the necessary criteria to receive the bonus; and
• the employee had received the bonus in previous years.

(c) The employee demanded payment of her bonus and to be returned to her pre-promotion role, failing which she would consider her employment terminated;
(d) The employer did not comply with the demand, resulting in the employee resigning from her employment, and commencing a general protections application against the employer; and
(e) The employer raised a jurisdictional objection to the general protections application on the basis that it had not dismissed the employer (given she had resigned).

Ultimately, the Commission found that the employee had no right to return to her pre-promotion position (as the employee’s right following parental leave was to return to her pre-parental leave role). However, the Commission did find that the employer’s failure to pay the ‘discretionary bonus’ amounted to repudiation of the employment contract, citing the following considerations:

• There was no evidence of any performance-related issues;
• The employer had achieved Company KPI’s, and no KPI’s had been set for the employee such that the employer could justify refusing the bonus on that basis;
• The employee had a reasonable expectation of payment, supported by matters including: (i) all other eligible employees having received the bonus; and (ii) the employee having received the bonus in previous years; and
• The bonus was a significant sum of money, and a significant part of the employee’s remuneration package.

The Commission found that the Employer’s repudiation of the contract amounted to ‘dismissal’ at the initiative of the employer under section 386(1)(a) of the Fair Work Act 2009 and the employee was determined to be eligible to continue with her general protections claim.

The flexibility case

To summarise the facts of Levi Moon v McMillan Shakespeare Limited:

(a) The employee was required to provide ongoing care to his spouse;
(b) The employer required the employee to apply for flexible working arrangements (to help facilitate the care of his spouse) every three months in accordance with its policies (and to provide evidence in support of each request);
(c) The employee became frustrated by the time-constrained approvals as he considered it onerous to manage the application process on such a regular basis;
(d) The employee argued that this made it difficult to make care arrangements for his spouse, and that (in the alternative) he should have been allowed to work from home; and
(e) The employee resigned following a meeting with the employer, in which he claimed that he was informed no further requests would be approved.

The employee commenced a general protections application. The employer raised a jurisdictional objection to the application on the basis that the employee had not been dismissed. The employer argued that approving the requests at 3-month intervals was reasonable to facilitate the gathering of up-to-date information on the employee’s circumstances and to assess the continued need for the arrangements. The employer also denied any suggestion it was planning to reject the former employee’s next request.

In this instance, the Commission determined the jurisdictional objection in favour of the employer (that is, that the employer had not dismissed the employee) and held that the employer’s actions were reasonable in the circumstances. In doing so, the Commission:

(a) Observed ‘it would be expected that a diligent employer would request evidence of a change in circumstances’;
(b) Formed the view that it was probable that the employee’s next request would have been approved;
(c) Acknowledged that the employer was not necessarily bound to uphold a flexible working request indefinitely, and therefore rejecting the request may have been reasonable; and
(d) Held that the employer’s conduct did not force the former employee to resign, and that among other available actions, the employee could have waited to see whether there was a rejection of his next request.

Key take-aways

These two cases demonstrate that every ‘forced resignation’ case will turn on its own facts. Employers should be wary of the potential for forced resignation arguments when managing employees, and particularly when making decisions to refuse contractual entitlements (even if discretionary), or which will impact on an employee’s ability to remain in their existing employment.

The bar for establishing that an employee has been dismissed by way of a forced resignation is a high bar, with employees needing to be able to prove that:

(a) The employer has engaged in conduct with the intention (determined objectively) of bringing the employee’s employment to an end; or
(b) Termination was the probable result of the employer’s conduct such that the employee had no effective or real choice but to resign.

However, Aitken Legal regularly assists clients to defend unfair dismissal and general protections applications despite the relevant employee having resigned. Employers can often leave themselves exposed to a forced resignation argument by not taking timely advice in situations where employees are threatening to resign because of something that has occurred during their employment.

Employers should also note the important lesson arising out of the OSM Australia decision, that while employment contracts often describe bonuses as being ‘discretionary’, this case indicates that discretion “is to be exercised honestly and conformably with the purposes of the contract.” Employers should note that a failure to pay a discretionary bonus without reasonable excuse may be considered a repudiation of the employment contract, which could then lead to legal proceedings such as those commenced in OSM Australia.

If you are ever uncertain about a potential resignation situation, please do not hesitate to reach out to the team at Aitken Legal.