The Right to Resign

The recent resignation of the Pope is one of the most high profile resignations in recent times although of course, on its own, it does not give rise to any employment law issues. However, what it does is highlight the right of an employee to resign and provide a useful segue into looking at the rights and obligations of parties to an employment relationship in a resignation situation. The reality is that resignation doesn’t get a lot of attention in the headlines – unless it is a case of someone “jumping before they are pushed”. Usually, when someone leaves employment the “attention grabbers” are elements like restructuring and the enforcement of restraints.

This article looks at some of the issues that can arise and ought to be considered in relation to resignations. The message is – forewarned is forearmed.

Notice periods 

As a starting point, employment agreements which specify minimum service periods are rare. In most cases, even in fixed term employment agreements, an employee has the right to resign from employment at any time on notice. Accordingly, care should be taken to ensure that the employment agreement between the parties clearly covers the obligations and rights of each party in regard to resignation.

The notice period required ought to be clearly specified in the employment agreement. It should be expressed as the minimum period of notice and further, it should be clear that an employer is not obliged to accept an extended period of notice.

There is no automatic right to pay an employee in lieu of notice unless that is specified in the agreement. The same applies to requiring an employee to take garden leave. Of course, the parties can agree to such variations but in the absence of agreement, the employee is both entitled and obliged to attend work. This can become an issue if, for example, the employee is leaving to work for a competitor and the employer doesn’t wish to have the employee remain in the organisation while, for example, there are discussions about the organisation’s future plans. Accordingly, it is best practice to ensure that the agreement reserves the right for the employer to either make a payment in lieu of all or part of the notice period and/or to place the employee on garden leave.

The employee’s employment ends when a payment in lieu of notice is made, which means that the employee is free to commence employment with a new employer.

By comparison, if the employee is placed on garden leave the employee remains employed by their existing employer and still owes all the normal duties of fidelity but is not required to attend work. An employer can also place restrictions on contacting clients and/or suppliers and/or colleagues. As the employee remains employed, he or she cannot commence a period of new employment until that garden leave period is completed.

Where insufficient notice is given by an employee, an employer can attempt to enforce an un-worked contractual notice period. Regrettably, a review of case law indicates more and more employees are ignoring their contractual notice periods and simply leaving their employment. In most cases the courts will not order the performance of a contract of personal service. Instead, the remedy for an employer is damages or loss. Such remedies can be difficult to prove and would need to be quantified as part of any claim. For example, if the employer has had to hire a temporary replacement, that is a cost that could be claimed. If the employer lost a contract as a result of not having the staff member to work on it, compensation for the loss could potentially be claimed, provided the employer could prove the link between the two (which can of course be difficult).

In addition to claiming for any damage or loss, it is possible to seek a penalty and a penalty against an individual can be up to $5,000. As is normal, in the first instance the penalty is payable to the Crown (unless a separate application is made, and granted, for payment to the employer).

If an employment agreement is silent as to a notice period, in circumstances such as a restructuring, the common law makes it clear that the Employment Relations Authority will read in and apply a reasonable period of notice. A common notice period is one month but the particular circumstances of employment may dictate otherwise.

Inducing a resignation 

Engaging in a course of conduct designed to induce an employee’s resignation is one potential ground for a constructive dismissal and therefore ought to be avoided by an employer. However, it is an issue that is becoming increasingly common as employers are having to manage employees who perhaps ought to be thinking about resignation, but are not.

The reality of the situation is that the onus is on the employer to deal with any issues proactively: if there are issues with the employee’s performance, there is an obligation to manage those as performance issues; if the employee’s role has developed and changed to the extent that the original role is no longer required, a restructuring process may be required. The key point is that the employer needs to deal with the issues, rather than simply hoping that an employee might ‘take the hint’ and decide to leave. In fact, employing a wait-and-hope strategy is inherently risky and to be avoided. Waiting to address employment issues makes them more difficult to address in the long run, and there is always the risk that the employment relationship will break down in the interim, as the issues exist but are not appropriately addressed. The recommended processes for dealing with those situations will be addressed in another article.

The unfortunate reality, as the Catholic Church is experiencing first hand, is that an employee’s resignation, for whatever reason, often seems to come at the least convenient time. With Easter being one of the main events on the Catholic calendar, searching for a replacement Pope at this time is arguably less than ideal.

However, if an organisation knows what it can and cannot do, then when a situation does arise, even if the timing is bad, it will be easier to manage.

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