Is it okay if the employee resigns?  Odd question, right?  Almost every employer would pretty much jump for joy if a problem employee decided to voluntarily resign instead of the dreaded termination discussion. Normally the question of allowing a resignation crops up when you are terminating an employee and that employee wants to be considered as having resigned.  Like a lot of things in the law, the decision to call it a resignation could potentially have a huge impact or no impact at all.

Public relations

The first consideration is always both internal and external PR.  Allowing an employee to resign can help that employee “save face,” minimizing any risk of defamation claims.  A common claim in this area is that you as the employer have somehow damaged the employee’s reputation by termination.  A “resignation” can allow a graceful exit, minimizing concerns for both the employer and the employee.  However, if you allow an employee to resign you need to think about how you will discuss the departure with other employees and external sources given that an abrupt resignation frequently signals that it wasn’t really a voluntary one.  If you allow a resignation, talk with the employee about what information will be provided to others when the inevitable inquiries occur.

Unemployment benefits

A resignation has little to no impact upon an employee’s right to receive unemployment compensation through Iowa Workforce Development because you were already in the process of terminating the employee.  This situation is considered a constructive discharge and as such, unless there is another disqualifying factor, like gross misconduct, the employee will still qualify for unemployment compensation going forward. It is also possible that categorizing a termination as a voluntary resignation could trigger other benefits such as a payout of PTO, bonus payment, or in the case of a “retirement,” other company benefits.  Know your policies on voluntary and involuntary terminations before going in to avoid accidentally providing benefits or creating new employer obligations.

References

References can be a point of contention with employees leaving, either voluntarily or involuntarily.  Under Iowa Code Section 91(B)(2), employers may disclose to a prospective employer work related information on former employees except in the following cases:

• such information violates the person’s civil rights
• the information is  knowingly provided to someone who has no legitimate interest in receiving the information
• the information is not relevant to the reference
• is provided with malice or without a good faith belief that the information is true. 

Because the exceptions to 91(B)(2) granting an employer limited immunity for providing references are so broad, many employers choose only to provide limited references for employment, such as job title, length of employment and last rate of pay.  Some employers will answer the question, “is __________ eligible for rehire?” If the employee is stating that he or she voluntarily quit and you as the employer are stating that the employee is not eligible for re-hire it could create some disconnect.

Reporting misconduct

In certain circumstances, there may be types of misconduct which must be reported by law and simply allowing an employee to resign rather than be terminated would not affect reporting.  This occurs frequently in highly regulated industries, such as healthcare, where a nurse may still need to be reported to the Iowa Nursing Board for licensure violations or a physician will be reported both to the Iowa Board of Medicine and the National Practitioner’s Data Bank. Misconduct in other professions, such as education, must also be reported by law regardless of whether it is an involuntary termination or a resignation.

Employees sometimes request to resign to keep the underlying information secret.  Private employers can typically keep most information secret unless it is otherwise required to be reported by law.  We will post a follow-up next week detailing a 2017 change to Iowa law, HF291, that impacts the ability of public employers to keep information secret.

If an employee asks you to accept a resignation rather than be terminated, keep in mind the PR implications, discuss the issue of references, and be aware of any mandatory reporting that will occur.