Constructive dismissal: employer varies contract, requiring unreasonable goals be met
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Linkstaff International v Roberts (1996) 67 IR 381
The facts:
Ms Roberts was employed as a consultant by recruitment company Linkstaff International in 1992. Her responsibilities included meeting billing targets of a little over $3,000 per month. Despite some early minor issues relating to her performance and attitude, Ms Roberts proved to be an able employee.
In early December 1993, however, Ms Roberts was called into a meeting with several senior figures in the company over a “crisis” that had arisen. Amid concerns expressed over Ms Roberts’ deteriorating relationship with Linkstaff’s Managing Director and her future with the company, it was made clear that a restructuring of her role would occur, and that she would be required to agree to the changes. She was told to take some time off and consider her future, which she duly did, returning a week later.
A letter had been prepared outlining her new responsibilities, including new billing targets – which were to increase to $7,000 per month. Knowing that she would not be able to arrive at the figures demanded, and apprehensive about the consequences of failing to do so, Ms Roberts refused to sign the letter. Instead, she elected to send a letter of resignation, on the basis that the new structure was a “drastic change from [her] original terms of employment”.
Ms Roberts subsequently commenced unfair dismissal proceedings in the South Australian Industrial Relations Commission.
What the court decided
In order to succeed in her claim under the unfair dismissal legislation, Ms Roberts needed to show that she had not resigned, but had in fact been constructively dismissed. At first instance, the Commissioner held that Ms Roberts had been constructively dismissed, and the decision was held to be correct on appeal.
The Full Commission found that the employer’s conduct in requiring Ms Roberts to agree to responsibilities which she was unable to comply with, amounted to a repudiatory breach. It was a “significant breach going to the root of the contract of employment” (Western Excavating v Sharp (1978) ICR 221) and also satisfied a wider test of being “conduct likely to destroy or seriously damage the relationship of trust between employer and employee”.
Notable quotes from the judgment:
“The appellant sought to unilaterally change a term of the contract it had with the respondent by requiring the respondent to substantially increase billings in a situation where the evidence supported the fact that the respondent was highly unlikely to meet the target in the relatively short time frame specified.”
Take-away message:
In this case the employer’s conduct in setting unachievable performance standards and requiring that the employee agree to the changes was sufficient to constitute a repudiation of the contract of employment. The principle applies to all employees, including senior executives.
However, applying this decision to other fact situations is best approached cautiously. Ms Roberts’ highest monthly billing rate had been $4,500; so reaching $7,000 every month was clearly and demonstrably beyond her ability. There was also ample evidence of bad faith on the employer’s behalf, including the fact that the company directors were aware that the new target was unlikely to be met.
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