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Rules on Pay After a Resignation

Do Voluntary Resignations Require Advance Notice? When you’re watching your labor costs, it is important to know how to handle an employee resignation, compensation-wise. If you require employees to provide two weeks’ notice of their resignation, you may have to pay them for that full period even if you release them earlier. But, even if you only request the advance notice, it still may be better employee relations to pay for that full two-week period.

Do Voluntary Resignations Require Advance Notice?

When you’re watching your labor costs, it is important to know how to handle an employee resignation, compensation-wise. If you require employees to provide two weeks’ notice of their resignation, you may have to pay them for that full period even if you release them earlier. But, even if you only request the advance notice, it still may be better employee relations to pay for that full two-week period.

Q: Can we require employees to give two weeks’ notice of their resignation? What happens if we tell an employee to leave prior to the end of the two-week notice period, are we obligated to pay the employee for the full two weeks? What if we only request the notice but do not require it?

A: If you specifically require employees to give notice, as opposed to simply requesting the notice, you may have to pay for the full two-week period even if you ask the employee to end employment before the completion of the two weeks.

Most employers request or require that employees give advance written notice of their intention to resign so that an orderly transition can be made. The amount of advance notification requested may vary depending on the nature of the position. Many employers suggest two weeks as an appropriate amount of notice for most positions, although up to four weeks may be preferable for upper management.

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(Download a free Termination of Employment model policy including HR best practices and legal background.)

Whatever the length of the period, though, the way you specify how resignation notices will be handled is important. A requirement, as you are suggesting, that employees give a certain amount of notice of their resignations, in some states may create an implied contract obligating you to give an equal amount of notice before terminating an employee. So, in those states, if you require notice of a resignation and then decide to terminate the employee earlier, you may be required to pay the employee for the balance of the notice period. Further, you may even find that you are required to give a similar amount of notice to any employee that you terminate. For this reason, a policy that requests notice from resigning employees, rather than requiring the notice, may be a more prudent course to prevent potential contract claims.

However, even if you only request two weeks’ resignation notice, you should be prepared to pay out for the full period if you then decide to terminate the employee early. Employers often have legitimate reasons for wanting an employee to stop working immediately, such as concerns about security or reduced employee loyalty or productivity. In these cases, many employers pay for the notice period, even if they have not created a contractual obligation that requires payment.

There are two basic reasons for voluntarily paying for the notice period. First, if you tell the employee to leave without pay after notice has been given, this action could turn a voluntary resignation into an involuntary termination and potentially make the employee eligible for state unemployment compensation for any period of interrupted employment. Second, and arguably more importantly, a termination action without pay sends a negative message to the rest of your workforce, i.e., if you give notice as requested, you may be penalized. As a result, morale will be hurt, and you likely will not receive many advance notices of future resignations.

(Download a free Termination of Employment model policy including HR best practices and legal background.)

Instead, if you compensate the employee for the notice period, your action should prevent questions about eligibility for unemployment benefits or implied contract violations and encourage other employees to give notice in the future.

Regards,

Robin Thomas, J.D.
Personnel Policy Service, Inc.

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