In a recent decision, the Fair Work Commission (“FWC”) was faced with deciding whether an employee had resigned or was, in fact, dismissed by his employer after his boss asked him to “finish up” his notice period early. The employee made a claim to the FWC alleging he had been dismissed and that his dismissal contravened the general protections provisions of the Fair Work Act 2009 (Cth) (“FW Act”). The employer raised an objection on the basis that the employee had not been dismissed, but rather, the employee had resigned and that the parties had agreed to reduce the notice period. Central to the dispute was if, in reality, his initial resignation became a dismissal.

Background 

The employee gave a month’s notice of his resignation, after experiencing the deterioration of his working relationship with his direct manager. The employee provided a month’s notice when his employment contract only required him to provide one week of notice. The issue in dispute was whether this resignation became a dismissal when his boss asked him whether he would like to “leave early” during a phone conversation.  

The employer argued that the employee had no willingness to stay, agreed to move on, and that at no stage was it agreed that the remaining period of notice would be paid out. 

What the FWC said 

The FWC noted that disputes often arise when employers and employees “agree” to end employment earlier by reducing the notice period. Such “agreements” often fall apart when final pay is drawn because of misunderstandings about what was agreed. Importantly, the FWC highlighted that the “most decisive factor” to be considered when a supposed agreement is made to end the employment earlier than the date notified by the employee, is whether the employee has a “real or effective choice” to work out the balance of the notice period with pay. 

The FWC went on to explain when an employee is, and is not, dismissed: 

• If the employee has the choice to work the full notice period with pay after giving notice of resignation, but freely agrees to end the employment earlier, the employee is not dismissed.  

• If the employer’s conduct leaves the employee with no real choice but to end the employment earlier than the notified date (without payment of the balance of the notice period), the employee is dismissed.   

If an employee freely elected to leave their employment earlier than previously notified, with a clear understanding of the consequences for the payment of the balance of the notice period, it is more likely that the employee resigned from their employment. In this case, there was no specific discussion about whether the employee would be paid for the balance of the notice period. Accordingly, the FWC decided it could not be said that the employee “freely agreed” to make his resignation effective immediately.  

The FWC therefore held that the employee had been dismissed and that he was entitled to make an application that his dismissal contravened the general protections provisions of the FW Act.

Key takeaways for employers  

Employers can have discussions with employees with a view to shortening a period of notice given by an employee. However, it is important that any decision made by the employee to shorten a notice period is made on a fully informed basis and the employee is aware of whether the remainder of that notice period will be paid out or waived.   

You can read more about the difference between a dismissal and resignation here.