When Does a Resignation Become a Dismissal?

An employee resigns and gives notice. The employer decides they’d rather the employee finish immediately and pays out the notice period instead. It’s a common approach- and one many businesses assume is risk-free.

Many business owners have approached resignations and notice periods in this manner forever and for commercial reasons we can all justify this through real life situations –

• The employee is going to work for a competitor, and you prefer them not to have access to client information
• There’s tension in the team already and keeping them seems risky or
• The employee has checked out already and productivity has dropped.

On the surface, it seems straightforward. The employee resigns, the business pays out the notice period, and everyone moves on. After all, the employee hasn’t lost any pay. Unfortunately, it’s no longer that simple.

In a somewhat recent decision made by the Fair Work Commission (Commission), Terex Australia Pty Ltd v Cameron, the Commission reinforced a point that many businesses still don’t quite grasp – if you bring forward an employee’s end date without their agreement, in the eyes of the law, they have not resigned – you have dismissed the employee. 

And that distinction changes everything.

The key question that the Commission looked at in this decision – who decided the end date? 

It was the employer.

The employee had nominated an end date.  The employer unilaterally replaced it with an earlier one.  The employee wasn’t given a choice.  The decision was made by the employer without agreement.  The employment ended because the employer stepped in and cut it short. 

The Commission’s focus wasn’t whether the employee was paid out or even whether they were happy with the arrangement. The question was who decided when the employment ended.

It’s about control.  And therefore, it was a dismissal, not a resignation.

Why this matters

Turning a resignation into a dismissal changes the ball game.  Now as an employer, you become exposed to:

• General protections claims which carry no minimum employment period and no cap on liability
• Unfair dismissal claims for eligible employees
• Legal fees, wasted time and stress
• Possible reputation damage.

How to avoid this

The good news is that all of this can be avoided with one very simple change in how you approach the conversation. 

If you prefer an employee to finish earlier, you put it to them as an option not a directive:

‘we’re happy to pay out your notice period if you prefer to finish up earlier.  Is that something you’re open to?’

This simple shift in language moves it from a directive to seeking agreement.

The all important next step

Clearly confirm the agreement in writing.  An email is enough, but you must have a paper trail.   

More

Even if you have a clause that allows for payment in lieu of notice in your employment agreements the risk remains – we still recommend taking the safer approach and seeking agreement from an employee who has resigned. 

Best practice – always phrase it as an option not a directive.

Handling a resignation right now?

Before you say anything, get in touch with the HR Sorted team. We’ll help you get the wording right and make sure you’re protected.

Written by Rachel Fechner