Constructive dismissal in NZ: what it is and how to avoid it

Constructive dismissal is when an employee resigns but the law treats it as a dismissal, because the employer’s serious conduct or breach left them no real choice but to leave. If a claim succeeds, the employer has to justify the resignation as if they had dismissed the employee outright.

Reviewed 15 July 2026Hello Monday consultants8 min read

What is constructive dismissal?

Constructive dismissal happens when an employee resigns in response to serious action or inaction by their employer that breaches the employer’s obligations or makes continued employment untenable. The resignation is treated as a dismissal the employer must then justify.

For a claim to succeed, the breach usually has to be serious enough that resignation was a reasonably foreseeable response, and that the employee had no real alternative.

What triggers a claim

The common thread is a serious breach of the employment agreement or the duty of good faith. Examples include:

A significant, unagreed cut to pay or hours.
A demotion or major change to duties without good reason or agreement.
Failing to deal with serious bullying, harassment or health and safety concerns.
Giving an employee a “resign or be dismissed” ultimatum.
Conduct that seriously damages the trust and confidence at the heart of the relationship.

The employee’s burden

The threshold is high, and the burden is on the employee to prove the employer’s conduct forced the resignation. Where practical, the employee is expected to have put the employer on notice of the problem and given a chance to fix it before resigning, unless the breach of good faith is so serious that notice is not realistic.

As with any personal grievance, the employee generally has 90 days from the date they resigned to raise the claim.

How employers avoid constructive dismissal

Take complaints and grievances seriously, and address them promptly and fairly.
Never use “resign or be dismissed” ultimatums; run a proper process instead.
Consult and get agreement before changing pay, hours or duties.
Deal with bullying, harassment and safety issues rather than leaving them to fester.
If someone resigns while upset, consider a cooling-off period and confirm the resignation in writing.

Frequently asked questions

What is constructive dismissal in New Zealand?

It is when an employee resigns but the law treats it as a dismissal, because the employer’s serious conduct or breach of obligations left them no real choice but to leave. The employer then has to justify it as if they had dismissed the employee.

Is “resign or be dismissed” constructive dismissal?

It can be. Pressuring an employee to resign, or giving an ultimatum that leaves no genuine choice, is a common basis for a constructive dismissal claim. It is far safer to run a fair disciplinary or performance process instead.

How long does an employee have to claim constructive dismissal?

Generally 90 days from the date they resigned, the same time limit as any other personal grievance, unless the employer consents or the Authority grants leave in exceptional circumstances.

How can employers avoid constructive dismissal claims?

Address complaints promptly and fairly, avoid ultimatums, consult and agree before changing key terms like pay or duties, and deal with bullying, harassment and safety issues rather than leaving them unresolved.

This guide is general information about New Zealand employment law, not legal advice. Employment situations turn on their facts, and the law can change. For advice on your situation, get in touch before you act.