What should you do when an employee says “I quit” in the heat of the moment? This recent FWC case highlights why employers should be wary of accepting verbal resignations.
“That’s it, I resign”.
On face value, this certainly sounds like a genuine resignation, yet the FWC recently found that this remark from an employee, which was followed up with repeated statements of intent, did not qualify as an official resignation.
So if you can’t always take a verbal resignation as a genuine resignation, how should you follow up with a statement like this? And how should HR respond when an employee quits in the heat of the moment?
HRM asked employment lawyer Mariam Chalak of JFM Law to unpack this case and its implications for other businesses, and to share her three-tiered approach for responding to an employee’s resignation.
The case in question
Before Chalak shares her tips, let’s dive into the details of the case.
After a casual pool cleaner raised underpayment issues with Newcastle-based charity Valentine Hydrotherapy Pools (VHP), and VHP did not respond in a satisfactory manner, he “stormed” out of a meeting and reputedly said, “That’s it, I resign then.”
When the employee returned to work a couple of days later after taking sick leave, he entered into another discussion with two management committee members over the issue. The conversation did not go well, according to the employee, and he left feeling upset.
That evening, he sent a text to the administration manager which read: “For legal purposes, I’d like you to inform [the] Committee [that] I’ll be handing in [a] resignation letter tomorrow.”
He added that he would be “going to see [a] lawyer about starting proceedings to get back 250+ hours of back pay” for the aforementioned underpayment claim.
However, the employee soon changed his tune after discussing the situation with his mother, after which he sent another text to his employer. It read: “I’ve been told not to quit, so I will be into work as per normal.”
The employee returned to his shift 30 minutes later and completed his pool cleaning tasks as usual.
Four days later, VHP’s management committee issued a termination letter to the pool cleaner which stated, “Your resignation has been formally accepted”.
Aggrieved by how his employment abruptly came to an end, the employee took VHP to the Fair Work Commission (FWC).
Correspondence, conduct and circumstances
FWC deputy president Tony Saunders’ ruling in favour of the employee came down to two factors, according to Chalak:
1. The nature of the correspondence between the employee and employer.
“The wording itself indicated that it was an expression of future intention, as opposed to a final decision to resign,” says Chalak.
This point of difference was considered at length by Saunders, who drew a distinction between an employee saying, “I resign” versus “I will hand in my notice”.
A notice of resignation should be expressed in “clear and unequivocal terms”, says Chalak. “The employee’s correspondence was only expressed as a future intention to resign and could [therefore] not be considered to be an effective notice of resignation”.
2. The conduct of the employee after he sent the correspondence expressing an intention to resign.
“The employer responded to that correspondence by accepting the employee’s resignation. And then immediately afterwards, the employee retracted his expression of intention to resign. Not only did he retract it, he also attended work and then continued to execute his duties for a further day,” says Chalak.
The circumstances surrounding the alleged resignation also entered into the commission’s decision.
“Generally with these forced resignations or resigning in the heat of the moment, they usually occur in situations where there’s high conflict between the employer and the employee, and it’s also an emotionally charged situation,” says Chalak.
“In this case, there were allegations of underpayment, and the employee was quite emotionally charged as well.”
Saunders ordered VHP to pay the pool cleaner four weeks’ of lost wages, but provided no ruling on the underpayment issue.
“It’s very common in unfair dismissal claims for there to be allegations of underpayment, but in terms of an unfair dismissal application, the commission only has the jurisdiction to make an order as to whether the dismissal was harsh, unjust or unreasonable, and then to make an order for compensation or reinstatement,” says Chalak.
“The underpayment is a totally separate matter that the employee would have to bring in a separate jurisdiction by way of a separate cause of action.”
The underpayment issue nonetheless remains relevant to the decision because it fuelled the employee’s frustration, and contributed to escalating his discussion with the employer into a high-conflict disagreement.
Responding to a verbal resignation
Reacting appropriately to an employee’s statement of resignation will help to ensure an employer doesn’t land up in front of the FWC.
Chalak suggests that companies follow a three-tiered approach:
1. Analyse the situation, especially if it involves high conflict.
It’s about conducting a “complete forensic analysis of all the circumstances”, says Chalak, which involves assessing the context that gave rise to the employee’s decision to resign.
If an employee gave a verbal resignation, Chalak says this could constitute a resignation, but it often breeds ambiguity.
“It’s very hard to be clear and unambiguous in verbal communications, and it obviously gives rise to an argument that the verbal notice of resignation wasn’t clear. But I don’t think a verbal notice of resignation would, on its own, mean that it’s not effective as a notice of resignation if it has been expressed clearly and on terms that cannot be disputed.”
2. Allow breathing time: Allow a reasonable period of time to lapse after the employee signals an intention to resign, says Chalak, so that both parties are entering the conversation in an objective and rational state of mind.
“A lot of employers rush into accepting a notice of resignation, especially in high conflict situations or when there are performance management issues or if there’s a workplace investigation. The reason they do that is because a voluntary resignation in the truest sense prevents an employee from following up with an unfair dismissal application.
“From a best practice point of view and also to reduce the liability that a small business might be faced with, take that extra step to verify the circumstances around the resignation because if it goes wrong, the business will essentially be grappling with a legal claim [anyway].”
3. Send correspondence seeking clarification
Chalak advises that employers determine whether the resignation was intended by asking in writing.
“These types of matters arise because there’s a lot of uncertainty. There’s usually one party that hasn’t communicated clearly, whether that’s verbally or in writing, so to ensure that someone has resigned, you would want to do that in writing so that you could rely upon that later if the employee files an unfair dismissal application.”
The Society of Human Resource Management has provided a helpful template to get you started.
It’s also best for an HR consultant to step in and seek that clarification, says Chalak. “Get someone who is not a conflicted party, but an objective representative, to get that clarification.”
This three-step approach could help employers and HR to determine whether an employee is acting in the heat of the moment, or throwing in the towel as a genuine resignation. The difference could prove critical.
“If not handled correctly, an employer will be forced to defend an unfair dismissal application in the Fair Work Commission. This can be a costly and time consuming exercise,” says Chalak.
Unsure how to tackle a tricky problem, like verbal resignations, with one of your employees? AHRI members can join the AHRI LinkedIn Lounge to discuss workplace issues with other HR practitioners.