Glenfield College BOT & Ors v Anderson

Constructive dismissal occurs when an employer makes a significant change to an employee’s terms or working conditions without their agreement, effectively forcing the employee to resign. Examples include unilateral reductions in hours, pay cuts, or changes to duties that substantially alter the employment relationship.

In New Zealand, employees can claim constructive dismissal if the employer’s conduct breaches the employment agreement or employment law, and the employee resigns as a direct result. The key question is whether the employer’s actions were justified and followed proper procedures.

This case shows that reducing hours without agreement or consultation can amount to constructive dismissal, exposing employers to claims for lost wages, redundancy pay, and compensation for hurt and humiliation.

Collective employment agreements (CEAs) set out terms and conditions for groups of employees, including provisions on hours, pay, and how changes to employment terms must be handled. Individual employment agreements (IEAs) often incorporate CEAs by reference, making their terms binding on the individual employee.

CEAs usually require employers to consult and negotiate with employees and unions before making changes. They do not generally allow unilateral reductions in hours or pay without agreement. Employers must carefully follow the variation procedures set out in the CEA to avoid breaching the agreement.

In this case, the Board argued the CEA allowed the reduction, but the Court found the Board did not properly follow the required processes, making the reduction unjustified.

Before reducing an employee’s hours, employers should follow a fair and transparent process to minimise the risk of claims. This includes:

• Reviewing the employment agreement and any applicable collective agreement to understand variation rights and obligations.
• Consulting with the employee and, if relevant, their union representatives early and in good faith.
• Providing clear reasons for the proposed change and discussing its impact.
• Negotiating genuinely to reach agreement or explore alternatives.
• Documenting all communications and any agreed changes in writing.

Failing to follow these steps can lead to claims of unjustified constructive dismissal, as unilateral changes are unlikely to be justified without proper consultation.

Significant reductions in hours may amount to redundancy if the employee’s role is effectively eliminated or substantially changed. Redundancy occurs when the employer no longer requires the employee’s job to be done by anyone.

Redundancy pay compensates employees for the loss of their role and is governed by statutory provisions and any contractual entitlements. Employers must comply with these obligations, including providing notice and redundancy compensation where applicable.

In this case, the Court awarded redundancy pay because the reduction in hours was so substantial it amounted to a redundancy situation. Employers should carefully assess whether changes trigger redundancy obligations to avoid legal claims.

Employers considering reducing employee hours should take practical steps to reduce legal risks:

• Check the individual employment agreement and any collective agreement for variation clauses and consultation requirements.
• Assess whether the proposed change is substantial enough to be considered a constructive dismissal or redundancy.
• Engage early with the employee and their representatives to discuss the reasons and explore alternatives.
• Document all discussions and agreements clearly.
• Seek legal advice before implementing changes to ensure compliance with employment law and agreements.

These steps help maintain good employment relationships and reduce the risk of costly disputes.

If an employee claims constructive dismissal, employers should respond promptly and carefully. This includes:

• Reviewing the circumstances and the employee’s concerns thoroughly.
• Seeking legal advice to understand the risks and options.
• Considering dispute resolution methods such as mediation or negotiation to resolve the issue early.
• Maintaining clear communication with the employee throughout the process.

Early and constructive engagement can prevent escalation to costly litigation and protect the employer’s reputation.