FWC Rejects Constructive Dismissal Claim: Why “Mutual Agreement” Matters for SMEs

FWC rejects constructive dismissal claims when there is no clear evidence that an employee was forced to resign.  When it comes to unfair dismissal claims, the Fair Work Commission (FWC) must first decide whether an employee was actually “dismissed” under the Fair Work Act 2009 (Cth). Without that, an unfair dismissal case can’t proceed.

One way an employee may claim dismissal is through constructive dismissal – where they argue they were forced to resign because of their employer’s conduct.

A recent case, Martin v Jim Aitken & Partners No. 1 Pty Ltd t/as Aitken Real Estate [2025] FWC 1542, shows how the FWC looks at these situations and what it means for SMEs.

The Case in Brief

• The employee was a Licensed Real Estate Salesman at Aitken Real Estate.
  
• A dispute arose in January 2025 over commission payments. The discussions became heated, with the employer at one point telling the employee to resign.
  
• In February 2025, the employer invited the employee to a termination meeting, raising allegations of misconduct and underperformance.
  
• At that same time, the employee had already received a job offer from a competitor.
  

During the meeting:

• The employer offered to redeploy the employee to another Sydney office.
  
• The employee refused, instead proposing that the relationship end with “no bad blood, no repercussions” and a fair payout.
  
• Both parties agreed to terminate by mutual agreement, with the employee receiving entitlements, commission payments, and four weeks’ notice pay.
  
• The employer confirmed this arrangement in writing.

Soon after, the employee joined the competitor. The former employer reminded him of his post-employment obligations and threatened legal action. In response, the employee lodged an unfair dismissal claim, arguing he was effectively forced to resign.

The FWC’s Decision

The Commission ruled that:

• The employment ended by mutual agreement. The employee was not forced to resign, and therefore constructive dismissal (s 386(1)(b)) did not apply.
  
• Even though the employer had initially intended to dismiss him, the outcome was an agreed termination, not a dismissal at the employer’s initiative (s 386(1)(a)).
  
• Any disputes over whether the “mutual agreement” released the employee from post-employment restrictions were matters for the courts, not the FWC.
  

As a result, the unfair dismissal claim was dismissed.

Why This Matters for SMEs

This decision highlights some important lessons for SMEs dealing with employee exits:

• Mutual agreements hold weight. If both parties clearly agree to end the employment and the terms are documented, it reduces the risk of unfair dismissal claims.
  
• Process is critical. Even if tensions run high, giving employees options (like redeployment) shows fairness and helps protect your position.
  
• Keep records. Written confirmation of the agreement and entitlements paid was central in this case. For SMEs, detailed documentation can mean the difference between a clean exit and a legal dispute.
  
• Don’t confuse issues. The FWC only looks at whether there was a “dismissal”. Other matters (like enforcing non-compete clauses) are separate legal questions.