Background:
The Complainant stated that he had been employed by the Respondent since November 2019. He claimed he had not received wages for four weeks of work in January 2023, violating the employment agreement and breaching fundamental terms of his contract. This non-payment placed him in a distressing situation, affecting his ability to meet financial obligations. Consequently, he felt compelled to consider himself constructively dismissed. The Complainant informed the Respondent, both orally and by letter dated January 30, 2023, that he would resign and consider himself constructively dismissed if the outstanding wages were not paid within seven days.

The Respondent submitted that the business specialised in sustainable timber products from the USA, an industry prone to market volatility. Financial performance was impacted by fluctuating exchange rates, global shipping conditions, and labour availability. Following the 2020-2021 pandemic, the industry faced a severe shipping crisis, a significant drop in the US/Euro exchange rate, and labour shortages, leading to increased raw material costs and a decline in cash flow from late 2022 to early 2023. After the Christmas break, options such as closing the business, temporary layoffs, or withholding wages were considered. The latter was chosen to maintain continuity, with staff consulted in early January 2023. Despite initial dissatisfaction, there was general acceptance. On January 30th, the Complainant threatened a Constructive Dismissal case if salaries were not reimbursed within seven days. Despite improved cash flow and starting reimbursement by February 13th, the Complainant left on February 15th. He returned in April under new terms but was removed from the payroll in June upon starting new employment.

Finding:
The Complainant filed a claim under s.8 of the Unfair Dismissals Act, 1977, on August 23, 2023, alleging constructive dismissal on February 15, 2023. The Complainant claimed he was constructively dismissed due to unpaid wages for several weeks, lack of a written contract, and unreasonable treatment by the Respondent, who also failed to pay other due wages promptly. The Officer determined that the Respondent breached the employment contract and acted unreasonably, justifying the Complainant's resignation. However, due to insufficient effort to mitigate his losses after leaving the job, the Complainant was awarded €8,500 in compensation. The claim was thus deemed well-founded.

Practical Guidance for Employers:
Employers should observe:

• Timely Wage Payments: Always ensure that employees are paid on time as per the terms of their employment contract. Delays in wage payments can cause significant distress to employees and may lead to claims of constructive dismissal.
• Clear Communication: Maintain open and transparent communication with employees, especially during financial difficulties. Inform them promptly about any delays or issues that may affect their wages.
• Written Contracts: Provide all employees with a written contract outlining their terms of employment, including payment schedules. This reduces misunderstandings and provides a clear reference for both parties.
• Consultation During Crises: If faced with financial crises, consult with employees regarding potential solutions. Document these consultations and any agreements reached to ensure clarity and mutual understanding.
• Address Complaints Promptly: If an employee raises concerns or issues a formal complaint regarding unpaid wages or other contract breaches, address the issue promptly and keep detailed records of your responses and actions taken.
• Legal Compliance: Ensure all actions, especially those taken during financial difficulties, comply with employment laws and regulations. Seek legal advice if necessary to avoid potential claims of unfair or constructive dismissal.

By following these guidelines, employers can mitigate the risk of constructive dismissal claims and foster a more positive and transparent work environment.

The full case can be found here:
https://www.workplacerelations.ie/en/cases/2024/june/adj-00047658.html