Forced resignation and employer obligations under the Fair Work Act

An employee who resigns is not always the one who ended the job. Under the Fair Work Act 2009 (Cth), a resignation counts as a dismissal if the employer's conduct left the employee no real choice but to leave. A dismissal found to be harsh, unjust or unreasonable can mean reinstatement, compensation, a published decision and months of distraction, even when the employee signed their own resignation letter.

This guide sets out what the law requires of you as an employer: who the unfair dismissal protections cover, the line between a lawful resignation and a forced one, the fair process you owe before any termination, what you must pay on a genuine resignation, and what happens if a claim is made against your business.

Who the obligation applies to

The unfair dismissal provisions bind national system employers, which covers most private sector employers in Australia, from a sole trader with one employee to a large corporation. Whether a particular employee is protected from unfair dismissal comes down to three questions:

Minimum employment period: the employee must have completed the minimum employment period before the dismissal, which is six months, or 12 months if the employer is a small business employer at the relevant time (s 383 of the Fair Work Act 2009 (Cth), and see the Fair Work Commission's summary). An employee who resigns, or is forced to resign, before completing that period generally cannot bring an unfair dismissal claim.
Award or agreement coverage, or earnings: the employee must be covered by a modern award or enterprise agreement, or earn less than the high income threshold, which is $175,000 a year from 1 July 2024 and is indexed annually.
Small business status: an employer is a small business employer if it employs fewer than 15 employees at the time (s 23 of the Act). The count includes the employee being dismissed, counts regular casuals, and treats associated entities as one employer.

Being a small business employer matters twice over: the minimum employment period extends to 12 months, and a dismissal that is consistent with the Small Business Fair Dismissal Code cannot be an unfair dismissal.

The forced resignation point cuts across all of this. The Act defines dismissed to include a resignation the employee was forced into, so an employee who can show they were forced out is treated as dismissed for the purposes of the unfair dismissal provisions (s 386(1)(b)), subject to the same eligibility thresholds.

The core obligation: never leave an employee with no real choice

Section 386(1)(b) of the Fair Work Act 2009 (Cth) says a person has been dismissed if they "resigned from his or her employment, but was forced to do so because of conduct, or a course of conduct, engaged in by his or her employer". This is what is commonly called a constructive dismissal.

The leading Australian statement of the test is Mohazab v Dick Smith Electronics Pty Ltd (1995) 62 IR 200: "When an employee has no effective or real choice but to resign it can hardly be said that the termination of her or his employment is truly at the employee's initiative." In that case, an employer told an employee to resign or it would call in the police, and the court treated the resulting resignation as a termination at the employer's initiative.

Conduct that commonly features in forced resignation claims includes:

Ultimatums: framing resignation as the alternative to dismissal, discipline, a police report or public embarrassment. The Mohazab case itself is the cautionary tale.
Significant unilateral changes to the job: a large pay cut or demotion imposed without consultation or lawful basis. The Act draws a precise line here: a demotion is not a dismissal if it does not involve a significant reduction in remuneration or duties and the employee stays on (s 386(2)(c)). By contrast, a significant cut in pay or duties can be exactly the conduct that leaves an employee with no real choice.
A hostile or exclusionary environment: sustained bullying, sidelining or withdrawal of duties that makes continued employment untenable.
Impossible demands: setting punitive targets or requirements that are clearly unachievable, where the practical effect is to push the employee out.

The test is not whether you subjectively intended to force a resignation. The Commission looks at the whole course of conduct objectively and asks whether the employee genuinely had a choice. A single frank conversation about whether the role is working is not, on its own, a forced resignation. The problem is conduct that removes the choice: threats, unilateral changes to core terms, or a pattern of behaviour designed to make staying untenable.

One practical consequence flows from this: treat any resignation as needing confirmation. Employees sometimes resign in the heat of the moment during a difficult meeting. The safer course is to acknowledge the resignation, allow a short period to reconsider, and only accept it once the employee has confirmed in writing that the decision is voluntary.

The duty to run a fair process before any termination

If you have concluded the employment is not working, the answer is process, not pressure. The Commission decides whether a dismissal is harsh, unjust or unreasonable by reference to the criteria in s 387 of the Fair Work Act 2009 (Cth):

whether there was a valid reason for the dismissal related to the employee's capacity or conduct, including its effect on the safety and welfare of other employees
whether the employee was notified of that reason
whether the employee was given an opportunity to respond
whether the employer unreasonably refused to allow a support person at discussions relating to dismissal
for performance issues, whether the employee was warned about the unsatisfactory performance before dismissal
the size of the employer's enterprise, and whether dedicated human resource specialists or expertise were available, which affects how strictly the procedures are judged
any other matters the Commission considers relevant

Those criteria translate into concrete steps when concerns arise:

Set clear standards and start early: position descriptions, key performance indicators and workplace policies that are communicated and consistently applied. Early feedback and coaching often resolve issues before they escalate.
Run a structured performance process: for performance problems, give the employee clear examples, support, a reasonable period to improve and regular check-ins. If matters progress to formal allegations, issue a show cause letter that sets out the concerns and invites a response before any decision is made.
Investigate misconduct properly: gather the facts impartially and afford procedural fairness, including a genuine opportunity for the employee to respond.
Decide and communicate: if termination is still appropriate after a fair process, communicate the decision, the reasons and the effective date clearly and in writing. Do not dress it up as a suggestion that the employee "should resign to avoid the paperwork".

There is one trap worth flagging specifically: unpaid stand down. Section 524 of the Act only permits an employer to stand an employee down without pay where the employee cannot usefully be employed because of industrial action (other than action you organised), a breakdown of machinery or equipment you cannot reasonably be held responsible for, or a stoppage of work for a cause you cannot reasonably be held responsible for. An employee being investigated is not one of those circumstances. If you need an employee away from the workplace during an investigation, paid leave or an agreed arrangement is the usual path. An unpaid stand down with no lawful basis can itself become the conduct that supports a forced resignation claim.

The duty to keep resignation conversations voluntary

Resignation can be raised by either side, but you control how the conversation is handled. When resignation is discussed with an employee, the safe framing is:

no decision to terminate has been made at that point
the employee has time to consider their position and to seek independent advice
any resignation is entirely voluntary and must be in writing
resignation is not being offered as the only way to avoid embarrassment, discipline or a worse outcome

A mutual separation deed can be a legitimate tool where both sides want a clean break. A well-drafted deed can settle notice, payments, releases, agreed reference wording and the return of property, giving both sides certainty. The critical point is that it must be genuinely optional. If the deed is presented as the only alternative to dismissal, it begins to look like the conduct that forced the resignation. Offer it as one option, give the employee time and encourage independent advice, and document that the offer was open and unpressured.

The duty to pay correctly on a genuine resignation

If a resignation is voluntary and accepted, your obligations switch to notice and entitlements. The employee gives notice in accordance with their contract or the applicable award or enterprise agreement. Where the employer terminates, s 117 of the Act requires written notice of the day of termination, or payment in lieu of notice of at least the minimum amount required.

On any termination, including a resignation:

Annual leave: accrued but untaken paid annual leave must be paid out when employment ends, at the amount that would have been payable had the employee taken the leave (s 90(2)).
Final pay contents: wages up to the last day, the annual leave payout, and any other amounts owed, such as long service leave entitlements where they apply.
Final pay timing: check the applicable award or enterprise agreement, as many set a deadline for paying final entitlements, often within a short period after termination.
No unilateral deductions: do not deduct from final pay unless the law or a written agreement that meets strict requirements permits it. Errors in final pay escalate conflict quickly and can convert a straightforward exit into a dispute.

If the resignation is contested as forced, do not simply pay out entitlements and treat the matter as closed. That is the point at which the process review below matters.

Consequences of getting it wrong

If an employee convinces the Fair Work Commission that the resignation was really a dismissal, and that the dismissal was harsh, unjust or unreasonable, the consequences are real:

The 21-day window: an application must be lodged within 21 days after the dismissal took effect, extendable only in exceptional circumstances (s 394 of the Act). The clock starts from the resignation taking effect, not from when you learn a claim is coming.
Reinstatement or compensation: the Commission can order reinstatement, or compensation where reinstatement is not appropriate. Compensation is capped at the lesser of 26 weeks' remuneration and half the high income threshold (s 392), which is $87,500 under the current threshold. The amount can be reduced where misconduct contributed to the decision, and it does not include compensation for shock or distress.
The small business protection: if you are a small business employer and the dismissal was consistent with the Small Business Fair Dismissal Code, the dismissal is not an unfair dismissal. The Code requires, in broad terms, that the employee be given the reason they are at risk of dismissal and a genuine opportunity to respond before dismissal, with summary dismissal reserved for serious misconduct such as theft or violence. Compliance with the Code is assessed, not assumed, so a small business should still document its steps.
Beyond the remedy: a forced resignation finding carries reputational and cultural damage. The decision is published, the team watches how the exit was managed, and the employment relationship ends in litigation rather than a clean handover.

Compliance checklist

Work through this checklist before any difficult conversation, resignation or termination:

Employment contracts set out role expectations, probation, notice and conduct requirements, and are signed before issues arise.
Workplace policies on performance, conduct, bullying and harassment are current, accessible and consistently applied, and managers are trained to follow them.
Concerns are raised early and proportionately, and every meeting, warning, plan and response is documented contemporaneously.
Termination is only considered after the s 387 criteria have been worked through: valid reason, notification, opportunity to respond, support person, and prior warnings for performance.
Resignation is never suggested as the alternative to discipline or dismissal, and any resignation is confirmed in writing after time to consider.
A mutual separation deed is offered only as a genuinely optional path, with time for independent advice.
Final pay is calculated correctly, including the annual leave payout, and paid within any award or agreement deadline.
You know whether you are a small business employer and what the Small Business Fair Dismissal Code requires of you.

Where professional help is usually needed

An employment lawyer's role here is to keep your process defensible before a claim exists, and to manage the claim when it arrives. A practitioner can review your process against the s 387 criteria, draft show cause letters, termination letters and separation deeds that do not read as pressure, advise on stand down and notice questions, and run or defend an unfair dismissal application at the Commission.

The trigger for a call is usually one of two moments. The first is before you hold a difficult resignation conversation or start a termination process, while there is still time to get the process right. The second is the day after a resignation letter arrives with a claim attached, when the 21-day clock is already running and the response needs to be measured, documented and legally framed.

The conduct matters more than the resignation letter

The single thing that decides a forced resignation claim is not the text of the resignation letter. It is the conduct that preceded it. A file that shows clear standards, fair warnings, genuine attempts to improve performance, and a resignation that was confirmed in writing after the employee had time to think is very hard to attack. A file that shows an ultimatum, a unilateral pay cut, or a month of hostility followed by a "voluntary" resignation is very hard to defend, no matter what the letter says.

The action to take this week is a short one: identify who in your business is allowed to raise resignation with an employee, and make sure every performance or conduct conversation is documented before the next one happens. The obligation is not complicated, but it is unforgiving of shortcuts taken in the moment.