To resign, or not to resign?

Picture this. You are trying to conduct a performance management meeting with your employee. They are terrible at their job, notoriously difficult to manage and universally disliked by their colleagues. Ten minutes into the meeting, they shout “Screw this, I quit!” before storming out of your office and slamming the door behind them.

Before you pop champagne and ring HR with the good news, you might pause to ask yourself: can I really accept their resignation?

Previously, case law made it clear that an employer should give an employee a “cooling off” period when they resign in the heat of the moment to allow the employee an opportunity to retract their resignation.

However, in stark contrast to this, two recent Employment Court (Court) cases held that where an employee has tendered an unequivocal (clear-cut and unmistakeable) resignation, even in circumstances where it was done impulsively, the employer is entitled to rely upon the resignation and is not obliged to offer a “cooling off” period.

Mikes Transport Warehouse Limited v Vermuelen

In Mikes Transport Warehouse Limited v Vermuelen [2021] NZEmpC 197, Mikes Transport Warehouse (MTW) held a performance management meeting with Mr Vermuelen, who became upset and agitated about his inability to perform his role. As the meeting progressed, he acknowledged that he had been struggling and submitted his resignation. MTW then offered Mr Vermuelen another role available in the company group, and Mr Vermuelen seemed happy with this outcome.

Mr Vermuelen later argued that his resignation was made in the heat of the moment and should not have been accepted. He argued that the employer’s failure to give him a “cooling off” period meant that he had been unjustifiably dismissed.

The Court dismissed Mr Vermuelen’s claim for unjustified dismissal and held that resignation is a unilateral act. The key question is not whether the resignation was given by the employee in a moment of distress, anger or frustration, rather, the key question is whether the employee resigned, in the plain sense of the word. This is an objective assessment and will likely be informed by the relevant circumstances.

The Court was of that view that resignation given in clear and unequivocal terms is more likely to satisfy the objective test, as opposed to words of resignation expressed in an equivocal manner (i.e. where there is room for doubt).

Urban Décor Ltd v Yu 

In Urban Décor Ltd v Yu [2022] NZEmpC 56, two employees and the director argued for fifteen minutes before the employees told the employer they quit, gathered their belongings, and left the premises. The employer sent the employees dismissal letters the next morning.

Following Mikes Transport Warehouse, the Court found the employees had resigned. This was because they clearly stated they quit, did not make contact until after hours; and when they did make contact, they did not indicate an intention to return.

It was irrelevant that the employer had sent them dismissal letters the next day as the test was not subjective (i.e. it did not matter that the employer did not think they had resigned).  The Court reiterated that resignation is a unilateral act by an employee.

The Judge qualified its analysis by adding that this was “contextual… For example, resignations given in a humorous or sarcastic fashion may not satisfy the objective test; nor will storming out of the room and being absent from work for a period of time but returning a short time later.”

The Court went on to consider whether the employees had been constructively dismissed by being led to resign due to a breach of duty by the employer but held that the evidence did not support this finding.

Duty of good faith remains

While it appears an employer is not obliged to offer a “cooling down” period after a crystal-clear resignation, the employer’s duty of good faith under section 4 of the Employment Relations Act 2000 remains.  In practice, this means an employer should communicate promptly and reasonably with an employee post-resignation.

To summarise, if an employee gives their clear resignation, even if it’s in the heat of the moment, an employer is entitled to rely upon that resignation.  However, where there is doubt about the words used or where there has been a misunderstanding (for example, they walked off the job for the day but came back the next day), an employer must give the employee the benefit of the doubt and discuss their intentions.

If you have any doubt about an employee’s resignation, please do not hesitate to reach out to a member of the employment team to discuss next steps.

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