Ending the Employer-Employee Relationship-Resignation vs. Termination

Despite high-profile portrayals in the media and entertainment industry to the contrary, most managers don’t enjoy firing employees. Indeed, many go through great lengths to avoid firing staff, such as investing in performance improvement plans (PIPs) or looking for other roles within the company that better fit the employee’s strengths.

Still, whether due to poor performance, violation of company policies or some other issue, employees can and do get fired all the time.

Life can be difficult for someone who’s recently been terminated from a job, particularly when looking for a new job. Potential employers are understandably wary of an applicant who has been terminated by their previous employer. For this, and other reasons, many employees would prefer – and even request – to be allowed to resign from a position in lieu of being terminated. The end result is largely the same – the severing of the employer-employee relationship; but this seemingly symbolic distinction can have important implications for both employer and employee.

Why Allow Employees to Resign?

First, let’s consider the obvious question: we know why the employee would often prefer resignation; but why would an employer agree to allow an employee being terminated to resign instead? After all, the employer no longer wants to continue the employment relationship, so things must not be going well.

That being said, just because an employer-employee relationship no longer makes sense (from the employer’s perspective at least) doesn’t mean the employer wants to see the employee struggle to find another job. And having a firing on one’s record often does create such a struggle.

“One could argue that in the majority of situations an employee should be given the opportunity to resign. Many times, an employee is fired for not meeting performance standards, not meeting the supervisor’s expectations, due to personality differences, or they are just not a good fit for the job,” says Denise Heekin, Esq., a labor and employment attorney for Bryant Miller Olive. “Allowing an employee to resign in such situations provides them with the opportunity to start fresh without a negative mark in their employment history. This concept should apply equally to employees whether they are in the top echelon or just starting off in a career. In some jurisdictions, it might also save an employer from having to pay unemployment.”

Allowing an Employee to Save Face

While avoiding putting an employee in a situation in which finding a new job is more difficult than it needs to be is one important reason many employers allow departing workers to resign, it’s not the only reason.

“Just as importantly, letting an employee resign often times gives that person a sense of dignity, control, and power that would be stripped away from them in the event of a termination,” says Damien Weinstein, a partner at Weinstein + Klein, a firm that specializes in management-side employment law for clients mostly in New York and New Jersey. “This is important for obvious reasons – not only do you presumably NOT want to cause this person emotional harm, but by letting them feel like they made the call and it’s on their terms you avoid the hurt feelings that can often result in a legal dispute. Here, a little bit of humanity goes a long way.”

Gene Camm, Director in the Compensation Resources Group at EisnerAmper, says such face-saving motivations tend to apply more to senior staff and long-tenured employees. Camm also points out that it’s relatively uncommon for an employee to be fired out of the blue, and employees often can see the writing on the wall in advance and don’t necessarily need a formal ultimatum to quit or be fired. “Most organizations have some type of progressive discipline policy, so employees become aware of their performance deficiency and may elect to start looking for new employment during their performance recovery period, which allows them to self-select out of the organization,” he notes.

Legal Considerations

Even in an at-will employment landscape, such as the one that prevails in the vast majority of the US, employee terminations can be fraught with legal risks, meaning that many employers may actually prefer letting an employee resign instead of being fired for the employers benefit.

“From a legal perspective, terminations are ALWAYS riskier than a resignation – terminations are arguably THE riskiest moments in an employer/employee relationship,” says Weinstein. “In the event of a risky termination (maybe you have reason to believe the employee is litigious), a series of conversations that serve the purpose of ‘opening the door’ for the employee can go a long way. If the employee feels like they’re making their own decision, and leaving on their terms, the risk of a legal demand letter alleging wrongdoing (let alone wrongful termination) decreases significantly.”

Severance and Unemployment Benefits

While pride and the ability to find a new job might make most employees prefer the ability to resign over being fired, there are also some drawbacks to resignation for the employee.

“Resignation instead of termination USUALLY means that no severance is paid – if the employee quits, they don’t get that benefit,” notes Weinstein. “However, when it’s a contentious situation or a litigious employee, it may be helpful to still offer some sort of benefit (severance, payment for insurance, etc.) to smooth things over. We’ve even seen scenarios where companies let employees resign at a mutually agreed upon future date, but they can continue on payroll (and even interview elsewhere) during that time.”

In addition to employer-provided severance, employees who voluntarily leave a job are generally not eligible for unemployment benefits. This varies by state, and states often have exceptions for “good cause” reasons for quitting, but generally speaking, quitting a job can make it much harder to receive unemployment benefits between jobs.

When Do Employers Refuse a Request to Resign?

As Heekin notes above, there’s an argument to be made that employers should allow employees to quit instead of fire them in most cases. But there are certainly instances when this general rule doesn’t apply, and terminating an employee may make more sense to an employer.

“An exception is when the employee engaged in some type of intentional, serious wrongdoing – like theft of time, gross insubordination or fighting,” says Heekin. “Certainly, if an employee did something that could potentially detract or negatively affect a company’s brand, an employer might not want to offer the opportunity to resign so it can be hold out that it took a “hard stance” against the negative conduct.”

Terminating an employee is often cited as one of the hardest aspects of any manager’s job. Obviously, the termination isn’t particularly easy on the departing worker either. Many employers are receptive to employee requests to resign rather than be terminated; however, it’s important to understand the pros and cons of this approach (from both sides of the employment equation) before proceeding one way or another.

Lin Grensing-Pophal is a Contributing Editor at HR Daily Advisor.

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