Heat of the moment resignations - is a cooling-off still required?

This article summarises the most recent employment law in approaching heat of the moment resignations. It considers the recent cases of Urban Décor Ltd v Yu [1] and Mikes Transport Warehouse Ltd and Modern Transport Engineers Ltd v Vermuelen [2]. Both cases depart from the traditional approach and clarify when an employer may accept a resignation that has been given in the heat of the moment.

Previous approaches to heat of the moment resignations 

Prior to the Employment Court decisions in Urban Décor and Mikes Transport Warehouse, the legal position has been that an employer cannot rely on an employee speaking words such as “I quit” or “I resign” as amounting to a resignation where it is obvious that the employee did not intend for their words to be taken literally. Such circumstances could include:

• when an employee has told the employer they are resigning but promptly retracts;
• when the words of the resignation form part of an emotional outburst; or
• when the words arise from a heated argument, but the employee contacts the employer later in the day in an attempt to resolve the issue.

In these situations, an employer has an obligation to act as a fair and reasonable employer and to allow a ‘cooling-off period’ before checking with the employee whether they truly would like to resign. 

Guidance from recent cases 

However, the recent cases of Urban Décor and Mikes Transport Warehouse depart from this approach by setting out circumstances where a heat of the moment resignation may be accepted by an employer.

In Mikes Transport Warehouse v Vermuelen, the employee was employed as a sales rep, but was struggling to make sales. One day his employer called him into a meeting to discuss his performance. Early in the meeting Mr Vermuelen became upset and agitated. During the meeting he acknowledged that he was struggling and announced his resignation. A discussion was then had about another role that could be available in the employer company's group. The employee later argued that his resignation was given in the heat of the moment and should not have been accepted by his employer.

The Employment Court held that questions regarding whether resignation was given in a moment of distress, or whether a fair and reasonable employer could have accepted such a resignation were not the correct questions to ask. The core issue is whether the employee resigned, which is a question that is determined objectively in the circumstances. Chief Judge Inglis held that:

• The Employment Relations Act does not require that a resignation is expressed in a particular form. Therefore, it may be expressed verbally, in writing or in some circumstances, through conduct.
• If there is a provision in the employment agreement that mentions how the employee may terminate their employment, it would be ideal that this provision was complied with when notice of resignation is given.
• However, a resignation that occurs on the spot where the employee does not return to work may be accepted on the basis that it is a “summary resignation” or “resignation without notice.” In such circumstances the employer may not claim that the resignation is ineffective. But it may have a claim against the employee for a breach of notice period. 

In Urban Décor the Employment Court referred to Vermuelen  about the approach to a possible unsafe resignation and made the following observations:

• An employee is not required to justify their decision to resign, nor does the decision need to be well thought through.
• The key issue with resignations is whether, on an objective assessment, the employee resigned. From a legal standpoint, if the resignation was notified there is no requirement for the employer to allow time before recognising the resignation.
• Clear words of resignation are likely to pass the objective test unless the surrounding circumstances suggest otherwise.
• If a resignation is effective, it cannot subsequently be a dismissal as the employment relationship ends when the resignation is given by the employee.
• If there is a concern that the resignation arose from misconduct by the employer, this is a separate issue to be addressed by referring to case law relating to constructive dismissals.

In other words, when considering the surrounding circumstances in conjunction with the use of clear words of resignation, an employer may not be required to give a cooling-off period. However, employers should be careful not to jump the gun for the sake of convenience. Employers must ensure that the potential resignation is considered from the perspective of an objective and reasonable employer who fully considers the context of the resignation. This is to minimise the risk of a constructive dismissal claim.

The context of the employees’ resignation in Urban Décor was that the employees (Ms Yu and Ms Jin) stated that they quit amid a heated argument with their employer. They proceeded to take their belongings and left the premises without clocking out. Neither employee returned nor made any contact for the rest of the business day. Together these circumstances constituted a resignation that the employer was entitled to accept. The employer’s subsequent dismissal of the employees did not amount to constructive dismissal because firstly the employees had resigned, secondly, the course of conduct that the employer followed was not for the deliberate and dominant purpose of coercing the employees to resign and thirdly, the employer did not breach any duties which led the employees to resign.

In Summary

• Resignations must be considered in the context of the surrounding circumstances in which the resignation arose.
• For employers, there is a risk that accepting a resignation that arose in heated circumstances can constitute constructive dismissal. However, the standard is from an objective and reasonable employer and there may be some circumstances that the employer is within their rights to accept.
• For employees, when making a heat of the moment resignation it is important to clarify any lack of intention of that resignation with your employer as quickly as possible. This could be by either contacting the employer to promptly retract or through conduct that would convey that to the objective and reasonable employer. Failing to do so could mean the risk of losing your job.
• For both parties, where a resignation is legitimate the employment relationship ends and there is no longer a duty of good faith requiring the employer to offer the employee their job back.

If you are an employer who has received a resignation in the heat of the moment, or you are an employee who has resigned in those circumstances, and you are unsure how to proceed please contact the employment team at DTI Lawyers to help you understand your legal rights, mitigate any potential risks and get clear guidance on your next options. You can contact the specialist employment law team on 07 282 0174 or by emailing reception@dtilawyers.co.nz.