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Resignations “with immediate effect” - What does this mean?

The wording is ambiguous. It could be interpreted as “ I am resigning today”. It could also be interpreted, as is more common, as “I am ending my employment today without giving notice”.

The perils for employers of latching on to heat of the moment resignations has been widely commented on by the Employment Relations Authority and the Employment Court. Put simply, good faith requires an employer to be responsive and communicative and this includes the requirement to clarify with an employee who is resigning whether resignation is their considered intention.

The gloss on this is when an employer treats the phrase resignation “with immediate effect” as synonymous with a summary resignation, without checking or clarifying with the employee if that was what the employee meant.

In the case of Philipa Shaw v Joint Property and Portfolio Management Ltd[1] the Company had an established practice of requiring employees to leave work immediately when they tended their resignation and to pay them in lieu of notice. Ms Shaw worked for the Company as a Portfolio Manager between 7 November 2016 to 16 May 2017, so less than six months, before tendering her written resignation “effective immediately”. She told Mr Bone, the Chief Executive of the Company, when she handed over the written resignation, that she had obtained a position with one of the Company’s competitors. Mr Bone directed Ms Shaw to leave work immediately and escorted her off the premises without delay and without any further discussion. His evidence was that he interpreted Ms Shaw’s resignation as her intention to leave immediately. However the Employment Relations Authority found that Ms Shaw was available and prepared to work out her notice period if the Company had wanted her to. The Authority found on the evidence that it was clear by 1:30 PM on the day of the resignation that Ms Shaw had communicated her expectations she would be paid in lieu of notice because she had been directed by Mr Bone to leave work immediately.

Ms Shaw claimed that she was unjustifiably disadvantaged because she didn’t have the opportunity to explain what she meant by “effective immediately”. She was deprived of the opportunity to work out her notice period or alternatively to be paid four weeks’ pay in lieu of notice. The Authority found that the Company’s actions were not what a fair and reasonable employer could have done all the circumstances at the time the disadvantage occurred. The Company breached its good faith obligations because it was considering making a decision that may have an adverse effect on Ms Shaw’s ongoing employment, to provide access to her with relevant information (namely interpreting her resignation as summary termination) and giving her an opportunity to comment on that interpretation, before making a final decision that she was breaching her employment agreement by not giving notice and then escorting her from the premises. Put simply, Mr Bone should have checked what Ms Shaw meant first. He deprived her of an opportunity to be heard on the issue, and to clarify whether she was intending to leave immediately or not. In doing so, the Authority found that Ms Shaw was unjustifiably disadvantaged.

Ms Shaw was able to mitigate her loss. As soon as she received an email from Mr Bone on 22 March 2017 making it clear that the Company considered her employment had ended on 16 March 2017, Ms Shaw made arrangements with the new employer to start work the following day. As a result Ms Shaw was only out of work for six days. She was awarded six days lost wages amounting to $1614.20 to compensate her for lost wages and $3500 to compensate her for the humiliation, loss of dignity, and injury to feelings she suffered as a result of her disadvantage grievance.

Learnings from this case include don’t leap to conclusions and always clarify with an employee who is resigning what they actually mean by “effective immediately.” When the shoe is on the other foot, if an employer is dismissing an employee avoid using the expression “effective immediately” altogether and state clearly what you mean.

[1] [2017] NZERA Auckland 263


This article is current as at the date of publication and is only intended to provide general comments about the law. Harkness Henry accepts no responsibility for reliance by any person or organisation on the content of the article. Please contact the author of the article if you require specific advice about how the law applies to you.

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