when things turn sour (a staffing love story).
When is a mutually agreed exit a good idea?
When the relationship between you an employee has become untenable (and both parties know it), it may be worth entering into a discussion about what an ‘exit’ from the business might look like for that employee.
Typically, a mutually agreed exit will be appropriate where there has been an irreparable breakdown in the relationship (e.g. due to interpersonal conflict), or because leadership, performance or strategic goals are misaligned.
A word to the wise ⚠️ - proceed with caution. Where you get a mutually exit process wrong, an employee will be in a strong position to make a termination claim against you.
What are the risks?
For example, if you enter into discussions with an employee and they do not agree to exit your business, they may make a constructive dismissal claim alleging that you forced them to resign (and therefore, that you ended their employment). A constructive dismissal claim is most commonly made by way of the unfair dismissal provisions in the Fair Work Act 2009 (Cth) (FW Act). Depending on the particular circumstances, an employee may also claim that you ended their employment/forced them to resign because of a discriminatory or other protected reason (which may fall foul of the general protections provisions of the FW Act, or discrimination law).
In addition, depending on the claim made, those involved in the discussions or involved in the decision making process, could be subject to civil penalties as an accessory (e.g. the HR Business Partner, Business Unit Head, COO, CEO etc). In a recent case, a HR Manager was held to be an accessory to a general protections claim, after they emailed an employee ‘accepting their resignation’ because the employee’s husband indicated that the employee would not be returning to the workplace (where she alleged she was subject to bullying and harassment).
So how do you know if a mutually agreed exit will work? In my experience, it’s a ‘gut feel’ taking into account all of the circumstances and risks.
Here’s some practical tips:
approach the employee with empathy. If they do not feel heard, your discussions will likely go pear shaped;
prepare for your discussions - have an outline of why an exit is mutually beneficial (hint: if its not, it will likely end badly);
don’t rush. It may be that the employee hasn’t decided whether a mutually agreed exit is agreeable to them (encourage the employee to sleep on it);
confine communications to with the employee, and not any support persons (e.g. their partner);
once agreed, capture the terms of your agreement in writing (see below regarding use of Deeds).
Should you use a deed of separation and release?
You may be surprised that my answer to this is, sometimes. It depends on whether you are paying a separation package offering more generous entitlements then what is required by law, or if there are inherent risks of a legal claim arising out of the employment relationship (e.g. unfair dismissal, general protections, workplace bullying etc).
A deed could draw an employee’s attention to risks or claims you are trying to 'get releases’ for (and in turn, result in them making a claim against you instead).
How much should you pay the employee?
This is a risk-based question depending on the given scenario and how the termination is being characterised. At a minimum, employees must receive their statutory entitlements (i.e. notice, annual leave entitlements etc).
Mutually agreed exits aren’t easy and the process should be led by experienced HR practitioners or lawyers.
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This information has not been prepared with your specific circumstances in mind, and may not be suitable for your business. This information is provided for your reference only and does not constitute the provision of legal advice or other professional advice by in house nous. By relying on any information on this website, you assume all risk and liability that may result.
