Does an employer's refusal to permit a return to work part-time amount to a constructive dismissal?

Overview

The Fair Work Commission (FWC) has recently found that an employer constructively dismissed an employee when it failed to accommodate her request to work part-time following her return from maternity leave. This is the first time that we are aware of such a finding having been made.

The employee brought her application as a general protections dispute and the employer objected to the FWC dealing with the application, on the basis that the employee had not been dismissed from her employment by the Company.

The employee's request for part-time work arrangements was made pursuant to the employer's certified agreement, which provided for a right to request part-time work up until the child reached school age, but with the caveat that the employer was able to refuse such a request on "objective business grounds".

The employer denied the employees request on the basis the role required a "dedicated full time on site resource" with a part-time off-site arrangement trialled in her absence leading to "frustrations". While the employee had been on maternity leave an external contractor had been engaged for 12 hours per week. The employee's request to return to work part-time was proposed to be staged with 1 day per week in November, 2 days in December, 3 days in January with a possible return to full-time work to follow.

The employer made alternative proposals following the rejection, including a return to work full-time or 3 full days and 2 half days per week or performing part of her pre-maternity leave position 1 day per week enabling them to recruit a full-time employee for the balance of her duties. These options were unacceptable to the employee and she ultimately ended her employment on the basis that the relationship of trust and confidence had been severed.

Consideration

In considering whether the employee had been constructively dismissed, interestingly, the Commissioner did not have regard to the Full Bench authority of the FWC predecessor (the AIRC) that is consistently cited and applied where the question of constructive dismissal arises before the FWC (P O'Meara v Stanley Works Pty Ltd (O'Meara)). Instead he relied on earlier decisions and stated:

"In my view, a radical distillation of the relevant legal principles which characterise a constructive dismissal is that an employee is entitled to leave their employment in circumstances where conduct of their employer is sufficiently inimical to the continuation of the contract of employment and the employment relationship… For my purposes the word inimical should be given its ordinary meaning. Inimical conduct will be conduct which is adverse, unfriendly or hostile to the contract of employment and the employment relationship."

The key downfall to the employer's case was that while it had portrayed the need to work full-time as "imperative" to the role, it had, since the employment ended, continued to engage the external provider for only 15 hours per week and there was no evidence that it had attempted to or was going to recruit for a replacement on a full-time basis. Essentially, the employer could not prove it had "objective business grounds" to reject the employee's request. On this, Commissioner Lewin stated:

"When judging the weight of the inimical conduct of unreasonably refusing Ms Rind's request to return to work part time in the particular circumstances of this case the gravitas or seriousness of that conduct should be viewed from the contemporary vantage point, which affords considerable importance to he ability of women to give birth to children without foreclosing their employment due to consequences of family formation."

Our views

We are of the view that the Commissioner oversimplified the test for a constructive dismissal. Despite the changes to the statute since the O'Meara decision it is still cited in recent FWC decisions as the "salient authority". In O'Meara the Full Bench stated:

"it is not simply a question of whether "the act of the employer [resulted] directly or consequentially in the termination of the employment." Decisions which adopt the shorter formulation of the reasons for decision should be treated with some caution…In determining whether a termination was at the initiative of the employer an objective analysis of the employer's conduct is required to determine whether it was of such a nature that resignation was the probably result or that the appellant had no effective or real choice but to resign." (our emphasis added)

It appears to us that Commissioner Lewin applied the shorter formulation of the test that the Full Bench warned against. That said, there is certainly a risk that if an employer does not genuinely consider an employee's request to work full-time and the employee ultimately resigns as a result, the employer could be faced with an unfair dismissal, general protections, discrimination or breach of contract action.

The National Employment Standards (NES) contains, from 1 July 2013 an even more comprehensive right to request with the right to refuse the request only on "reasonable business grounds" now including a non-exhaustive list of what "reasonable business grounds" may be.

The NES notes that examples of changes in working arrangements include changes in hours of work, changes in patterns of work and changes in location of work. Reasonable business grounds include the following:

• that the new working arrangements requested by the employee would be too costly for the employer;
• that there is no capacity to change the working arrangements of other employees to accommodate the new working arrangements requested by the employee;
• that it would be impractical to change the working arrangements of other employees, or recruit new employees, to accommodate the new working arrangements requested by the employee;
• that the new working arrangements requested by the employee would be likely to result in a significant loss in efficiency or productivity; and
• that the new working arrangements requested by the employee would be likely to have a significant negative impact on customer service.

Importance to employers

Employers need to be more careful than ever when citing "reasonable business grounds" as a basis for refusing a request for flexible working arrangements by an employee, because if the business grounds cited cannot be evidenced before the FWC or the Courts, an employee is likely to succeed in a claim for unfair dismissal, general protections, discrimination or breach of contract.

In our view the only way to be able to evidence a request for flexible working arrangements cannot be accommodated is to trial it. All apparent concerns can be cited from the commencement of the arrangement but unless they prove true impediments to the business during a trial, an employer is unlikely to be able to succeed in satisfying the FWC or the Court that it had reasonable business grounds for refusing the request.

Given the significance of this development, if your business receives a request for flexible working arrangements from an employee, we highly recommend that you obtain legal advice before responding to the employee.

If you would like more information about the case, please contact National Workplace Lawyers on +61 2 9233 3989. 

National Workplace Lawyers

Note — this is for information purposes only and does not purport to be comprehensive or to render legal advice.