An employee was recently awarded $33,000 after the FWC found his mental health struggles meant his resignation was not voluntary. Here’s how employers can recognise when they shouldn’t take a resignation at face value. 

An employee’s decision to resign is often clear-cut: they’ve weighed up their options, made up their mind and are ready to move on. But when resignations occur in complex, high-pressure or emotionally charged situations, their validity can be called into question.

A recent FWC case in which an employee was awarded more than $33,000 highlights just how fine the line can be between a valid resignation and an unfair dismissal.

The employee, who was experiencing significant mental health challenges, resigned during a period of severe distress.

Even though the employer sought confirmation from his doctor that he was capable of making the decision, the FWC found this was not enough, ruling that the employer had not taken adequate steps before or during the resignation to safeguard the employee’s wellbeing. 

In assessing whether the resignation was genuine, the FWC emphasised that a resignation made during acute psychological distress – particularly where the employee feels they have no meaningful alternative – may be legally characterised as a dismissal initiated by the employer.

As a result, it found that the employee’s “dismissal was harsh, unjust or unreasonable” and, in lieu of reinstating the employee, the business was ordered to pay more than $33,000 in compensation.

“The Commission said that in the circumstances, they could have done more because his situation was so dire. That’s a very tough threshold,” says Will Snow, Director at Snow Legal.

Employee lacked “real and rational intention to resign”

The employee in this case, a customer service officer who had worked at the company for around two years, brought the claim against his employer after resigning in March this year. 

Before his resignation, he had been experiencing significant mental health deterioration linked to workplace conflict and unresolved complaints, and had provided a medical certificate stating he was unfit to work.

After a period of personal leave, he resigned via a lengthy email that the FWC later described as “discursive and difficult to follow”.

In response, the employer sought confirmation from his doctor that he was “sound of mind” when making the decision. The doctor confirmed he had the capacity to make choices about work, and the employer processed the resignation immediately.

However, the FWC found the worker’s emotional state, along with the tone and structure of his resignation email, meant he “could not reasonably be understood to be conveying a real and rational intention to resign”. 

It also criticised the employer’s conduct in the weeks leading up to the resignation, particularly its failure to address his complaints, and concluded that the cumulative effect of conflict and unresolved issues meant the employee had “no effective or real choice but to resign”.

The ruling emphasised that the employer should have allowed a reasonable period of time for the employee to recover and consider his decision. 

“I’ve seen lots of situations where employers jump on a resignation,” says Snow. “It’s sent, then [soon] they respond, ‘That’s great, thanks for confirming, we’ve paid your annual leave and cancelled your access pass.’

“But employers have to be aware that if they jump on resignations very quickly, and if there are pressing factors [contributing to the decision], then it can be challenged.”

Three scenarios where employers should pause before accepting a resignation

Mental health is just one factor that can influence whether a resignation is genuine and voluntary.

Below, Snow provides insight into how to manage resignations when wellbeing is involved, as well as two other scenarios where an employer should think twice before accepting resignations at face value.

1. What if an employee resigns during a period of poor health?

As demonstrated by the case above, when an employee is on medical leave, anything resembling a resignation should be treated with caution. 

“If an employee is unfit to work, employers will want to be very careful about managing discussions about resignation,” says Snow.

“That’s when you might say something like, ‘I hear that you want to resign, and I’m not disbelieving you, but take some time to think carefully about it.’”

While Snow says there’s no legal requirement for employers to offer a cooling off period following a resignation, doing so can demonstrate a genuine effort to ensure the decision is free from pressure.

Even if an employee is fit to work, it’s important to consider any external pressures that could be impacting their state of mind.

“For example, that might include a mental health condition that’s worsening, family and domestic violence, or a death or serious illness in family or friends. 

“Employers have never known more about people’s personal circumstances because of welcome changes in our society and culture, [such as] dropping the stigma around talking about mental illness or family and domestic violence [at work].” 

“Employers have to be aware that if they jump on resignations very quickly, and if there are pressing factors [contributing to the decision], then it can be challenged.” – Will Snow, Director, Snow Legal

2. What if an employee ‘rage quits’ in the heat of the moment?

When an employee suddenly resigns during a confrontation, a disciplinary meeting or an emotionally charged conversation, HR is often put in a tricky position.

While some of these outbursts might come as a result of a genuine desire to terminate the employment relationship, others may be a temporary reaction to a difficult situation. 

In instances like these, it’s important to investigate any workplace issues that could have contributed to the outburst, says Snow.

“If someone’s saying, ‘You’re forcing me to resign because of this situation,’ that’s a big red flag,” he says.

Failing to address hazards like conflict or performance management before a resignation can give rise to a constructive dismissal claim, which is where an employee feels they have no choice but to resign.

“[Employers should ask], ‘What support do you need? Do you need to take some time off or see your doctor? Is there anything we can do while we look into this?’”

An approach like this not only minimises legal risk, but also reinforces a culture where people feel supported even if emotions are running high.

3. What if an employee gives an ultimatum?

When an employee suggests they may walk away unless something changes, it’s important for employers to determine whether they are flagging a genuine workplace issue that needs addressing or testing the waters for a better deal.

For example, an employee may indicate they’ll leave unless their remuneration is reviewed, which could be a cue to assess whether there are underlying equity, market-alignment or retention risks driving the conversation.

If the employee is simply seeking a benefit the organisation can’t provide, such as a promotion or higher pay, refusing them is not the same as pressuring them to resign, says Snow.

“An employer saying no to what they want isn’t them saying, ‘You don’t have a job here anymore.’” he says.

“[However], it’s good to give a justification – like showing that their salary is at a reasonable benchmark, or saying that you don’t consider out-of-sequence pay rises.”

In many cases, an ultimatum can signal frustration or deeper dissatisfaction. As with the two scenarios above, Snow suggests consulting with the employee to determine if any workplace issues have influenced their decision, and to address those concerns before treating the resignation as final.

“In addition to the usual checklist – are they working their notice, are we paying it out, are we waiving it because everyone wants to move on – build in another checkbox: are there pressure factors at play here that need to be considered?”

By stepping back and exploring the circumstances, employers protect both the individual and the organisation.

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