What is Constructive Dismissal?

What are an employee’s rights when the workplace becomes unbearable?

Imagine you are a sales professional whose livelihood depends heavily on a commission-based salary structure. Your employer suddenly and unilaterally implements a new pay system that reduces your gross income by nearly half. Despite your attempts to discuss the financial hardship this causes, your employer maintains that the decision is final and non-negotiable. While you still retain your job title, the radical change to your financial security and crucial terms of your contract makes the continuation of the employment relationship functionally untenable, to the point that you decide to resign. Although it is technically correct that you were not fired but resigned instead, this “resignation” is still a form of dismissal, specifically referred to as constructive dismissal.

Constructive dismissal is where, although the employee technically terminates the contract of employment through resignation, the law treats the termination as a dismissal. This is because the employer’s conduct “forced” the employee’s hand. According to section 186(1)(e) of the Labour Relations Act (LRA),¹ constructive dismissal occurs when “an employee terminated employment with or without notice because the employer made continued employment intolerable for the employee”.

The Foundational Requirements

For a claim of constructive dismissal to succeed, the law requires three distinct elements to be proven simultaneously (the Solid Doors test):

The employee must have resigned or otherwise ended the employment relationship.
The reason for the resignation must be that continued employment has become intolerable.
The employer must be responsible for creating the intolerable circumstances.

If any of these three elements is missing, the claim will fail. For instance, if an employee resigns for reasons unconnected to the employer’s conduct, such as to take a better job elsewhere, no constructive dismissal exists.

The Objective Test for Intolerability

Courts apply an objective standard to determine if a situation was truly intolerable. It is not sufficient for an employee to subjectively feel that they can no longer work for the employer. Instead, a reasonable person in the shoes of the employee must find the situation “objectively unbearable”.

The threshold for intolerability is exceptionally high. Courts have noted that considerable levels of irritation, frustration, and tension are inherent in most employment relationships and do not necessarily justify a claim of constructive dismissal. Intolerability implies conduct characterised as “unendurable or agonising” rather than merely uncomfortable or difficult. Examples of conduct that may reach this threshold include sexual harassment, physical assault, or egregious attacks on an employee’s dignity.

The Principle of Last Resort and Internal Remedies

A critical factor in establishing intolerability is whether the resignation was a measure of last resort. The law generally expects employees to attempt to resolve their grievances through the employer’s internal procedures before resigning. Failing to follow an available grievance process that could have resolved the issue often leads the courts to conclude that the resignation was premature or “unduly rash” rather than forced by necessity.

However, this requirement to exhaust internal remedies is considered flexible. An employee may be absolved from this obligation if they can prove that following such procedures would have been ineffective or futile. That said, simply asserting a lack of confidence in the process is usually insufficient. The employee must demonstrate specific circumstances that justify bypassing internal recourse.

Constructive Dismissal in Business Transfers

The LRA also recognises a specific form of constructive dismissal under section 186(1)(f). This occurs following a transfer of a business as a going concern (section 197) if the new employer provides the employee with terms and conditions of employment that are “substantially less favourable” than those provided by the old employer. This provision acts as a safeguard to ensure that business restructuring does not unfairly undermine an employee’s job security or work standards.

Burden of Proof and Remedies

The adjudication of constructive dismissal disputes follows a two-stage approach:

Stage One: The employee bears the initial onus to prove that they were dismissed. This is a jurisdictional fact. If the employee fails to prove dismissal, the CCMA or bargaining council lacks the jurisdiction to hear the case.
Stage Two: Once a dismissal is established, the onus shifts to the employer to prove that the dismissal was fair. While it is uncommon for a constructive dismissal to be found “fair,” it is legally possible if the employer can justify its conduct based on a valid reason and followed a fair procedure.

If an employee successfully proves that they were unfairly constructively dismissed, they are entitled to remedies under section 193 of the LRA. Reinstatement is considered the primary statutory remedy and should be ordered unless the employee does not wish to return, the relationship remains intolerable, or it is not reasonably practicable. If reinstatement is inappropriate, compensation may be awarded, which is capped at 12 months’ remuneration for standard unfair dismissals. In cases where the underlying reason for the constructive dismissal is “automatically unfair” (e.g., discrimination or exercising LRA rights), the compensation cap may be increased to 24 months.