Best practices for employee resignations

Earlier this year, the Fair Work Commission (FWC) dealt with an unfair dismissal case where an employee claimed he was forced to resign shortly after a private meeting with his employer. The employer argued that there were many issues with the employee’s performance over several months, and that it didn’t compel him to resign.

Ultimately the FWC ruled in favour of the employer.

“That the [worker] chose to resign rather than participate in a process that may have resulted in a PIP [performance improvement plan] does not meet the high hurdle necessary to establish he had no real or effective choice,” the Commission said.

The 2023 decision serves as a good reminder for employers when it comes to best practices around employee resignations.

Performance management and resignations

In this kind of situation, the most important thing an employer should have is a transparent disciplinary and performance management process in place — and that process should afford “natural justice” – fair treatment – to the employee, Andrew Rich, head of industrial and employment law at Slater and Gordon, told HRD Australia.

“If the process makes clear that that was just the point at which the allegations were being delivered or the performance issues have been raised, and that there was going to be a chance for the employee to respond et cetera, et cetera, then that can tend to avoid a claim by an employee,” he said.

To further safeguard employers from such employee claims, Rich suggested they take notes of discussions that have happened and include another person in the room, rather than having a one-on-one meeting.

“The best practice would be for there to be a discussion with that person by a trusted manager or somebody similar to discuss what's proposed,” Rich said. “And then if, at the end of that meeting, the person still wants to resign, then to ask them to put the resignation in writing.

“And I think along the way also for decisions to be made about what will happen during the notice period as well and how, because there are also all those practical aspects apart from resignation which need to be dealt with as well.”

Terms of contract in resignations

Ultimately, the terms of an employee’s resignation come down to the terms of their contract, Rich said.

“If an employee wants to resign of their own volition, then they need to comply with the terms of their contracts, which will usually require notice in writing to give effect to the resignation,” he said.

From there, the employer is entitled to accept the resignation and treat the employment as coming to an end in accordance with the terms of notice given.

However, each case has its own effects or consequences following the notice of resignation, Rich said.

“There might be, for example, debts that are due as a result of termination in certain circumstances. So sometimes there are training bonds that people might have to repay and things like that. But again, that will be determined by the terms of the contract.”

Another result is where an employer could continue to pay an employee but ask them to stop doing more work depending on their contract.

“In most situations, they'll be able to put them on what's sometimes known as gardening leave where they effectively, for the period of the notice, ask them to stay at home and not do anything but they’re still employed,” he said.

Avoiding unlawful actions in resignations

There are some situations where an employer’s conduct can have a negative impact on an employee who opts to resign.

“The things that the employer might do wrongly is it might victimise or deal with the employee differently and perhaps adversely to the employee because they've resigned, in a way that causes, let's say, psychological injury — that’s [the] worst case scenario,” Rich said.

Such cases can lead to legal challenges for an employer.

“If there's unlawful or discriminatory action taken in some way against an employee in a way that’s bullying or harassing or something of that kind, which leads to injury, then you've got a workers’ compensation claim on your hands potentially,” he said.

“So it's important not to bully harass or otherwise treat a person in a way that might have a consequence of some sort of personal injury as a result.”

Rich added if the action an employer takes following an employee’s resignation is not reasonable, then a workers’ compensation claim could be accepted.

“It's about the reasonableness of any action that they take once they learn that the employee’s resigned,” he said.

Addressing the issues behind resignations

Another question employers should keep in mind when handling resignation is around the reason for the resignation. This could provide employers a chance to rectify any issues the employee may have had in the lead up to them giving notice.

“If the reason for the resignation suggests that there's been some unlawful behavior that hasn't been addressed in the past, then the resignation or the notice of resignation might give an employer an opportunity to address the issues that employee might otherwise have thought couldn't be or wouldn't be addressed,” Rich said.

“It might present an opportunity to minimise any ongoing exposure or any potential unlawful action plans that might be brought by the person.”