Can unpaid wages amount to constructive dismissal?

Authority says employer's 'consistent' failure to pay led to resignation

Can unpaid wages amount to constructive dismissal?

The Employment Relations Authority recently dealt with a worker’s claim that she was forced to resign due to her employer’s consistent failure to pay her wages.

The worker, Hyeri Kim, was formerly employed as a head chef at Brak Burns Limited (BBL), formerly known as Burgered Restaurants Auckland Limited. She lodged a constructive dismissal claim against BBL and its director, Murray Osmond.

On April 6, 2022, Kim resigned from her position, alleging constructive dismissal by BBL. She raised concerns about various issues, including BBL's failure to pay her wages in accordance with her employment agreement.

Background of the case

Kim commenced her employment as a lead chef on February 4, 2021, and was promoted to head chef for the Café, a part of BBL's operations, on January 24, 2022.

Her normal working hours were eight hours a day from Monday to Friday, subject to variations based on customer traffic at the Café.

Throughout her employment, Kim said she faced challenges with late or non-payment of wages by BBL, starting from November 2021 until her resignation.

Despite raising the issue with senior staff, BBL failed to address the non-payment, leading to financial strain for Kim.

Kim resigned on April 6, 2022, citing financial crises due to non-payment of wages as the primary reason. She lodged a personal grievance against BBL for constructive dismissal on June 15, 2022, highlighting instances where she was not paid for her work.

Dispute over payments

BBL acknowledged its obligation to pay outstanding wages and holiday pay to Kim in an April 11, 2022 correspondence.

However, there was a dispute over the calculation of the owed amount, with Kim contesting BBL's calculation.

The Authority said that BBL's failure to pay Kim in line with her employment agreement constituted a breach of both her contractual terms and statutory requirements under the Wages Protection Act 1983.

Was it constructive dismissal?

“Generally, constructive dismissal is when an employer’s conduct compels a worker to resign. This includes circumstances where an employee’s disadvantage was caused by its employer’s breach of obligations owed to the employee,” the Authority said.

“A resignation may be deemed to be a constructive dismissal if an employer could reasonably foresee that an employee would resign rather than put up with the ongoing breaches.

Kim's resignation stemmed from BBL's consistent failure to fulfill its obligations regarding wage payments.

Ultimately, the Authority said that this action, or inaction, by BBL, amounted to constructive dismissal, as it was foreseeable that Kim would resign due to non-payment of wages.

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