TRACEY’S PRACTICAL EMPLOYMENT TIP
OF THE MONTH*

FEBRUARY 2007: TERMINATION WITHOUT CAUSE v. RESIGNATION

One of the most common issues to arise during a consultation with a prospective client who has been, or believes he/she is about to be, terminated without cause relates to whether there is any benefit to either resigning before being terminated or, if they have already been fired, negotiating to have their termination converted into a resignation. The simple answer is no.

This almost universal concern among my clients (whether they are executives or employees) is linked to the erroneous belief that being terminated without cause carries a stigma that will diminish a prospective employer’s perception of their value. In my experience, this is not a valid concern in today’s job market. In fact, just the opposite is true as any prospective employer is more likely be wary of an employee who resigns from a perfectly good job without having another in hand. Employers understand that their own actions have torn the social fabric of our parents’ and grand-parents’ generations where employees had a reasonable expectation of a job for life. In this era, unless you have a reasonable explanation as to why you would walk away from your old job before finding another one, a prospective employer would likely think that you either: (i) were forced to resign because of poor performance or improper behavior, (ii) engaged in conduct that would have gotten you fired had your prior employer learned of it before your resignation, or (iii) had a problem getting along with your supervisor and therefore may not work well with others. These reasons, and a myriad of others that might come to your prospective employers mind, are far more detrimental to your perception of value than the simple truth that you, like thousands of other employees in today’s economic climate, were downsized or had your position eliminated as part of a restructuring to improve your company’s bottom line.

Not only does a resignation potentially undermine your perception of value to prospective employers, it may also cause you unnecessary financial injury in circumstances where you choose to resign before your employer has the chance to terminate your services without cause. By resigning before being terminated, you will forfeit the obvious benefits of maintaining your employment such as your salary and health and welfare benefits for as long as possible. By resigning you will also likely forfeit your right to various post-employment benefits under your employer’s policies and programs including your right to severance, if such a policy is in place, and to continued vesting in, or exercising of, stock options. In addition, if you resign instead of allowing yourself to be terminated without cause you will lose any leverage to negotiate for an enhanced severance package as your resignation will likely eliminate any rights that would arise from the decision or your employer’s failure to pay you all that you may be due by contract or policy. Lastly, if you resign you will likely lose any right you have to receive unemployment benefits.

I understand that from a personal/emotional perspective your instinct is to believe a resignation is the preferred manner of departure. However, reality suggests that under most circumstances resigning before you are fired or negotiating to have your termination without cause altered to a resignation does not make practical sense.

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* Disclaimer: The contents of this page are for informational purposes only and nothing herein is intended to constitute legal advice nor should anything contained herein be taken or relied on as such. Each individual executive and employee has a unique set of facts and circumstances that the general discussion set forth above may be wholly inapplicable to. Only through consultation with a lawyer from our firm in which all of the facts and circumstances of an individual’s unique situation are explored and considered can a true legal assessment of your rights and remedies be ascertained. Any use of this information is taken solely at your own risk.