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Resign in Haste, Repent at Leisure

Whilst the timing of a resignation will usually be contingent on multiple factors, it is vital that Senior Executives do not act in haste when tendering their resignation. In this alert, Partner Merrill April highlights some of the legal and practical issues that Senior Executives ought to consider when resigning their position.

We recently published a news alert with our 5 Top Tips for Senior Executives to Consider when Making a Strategic Move, one of which was “Don’t be too Quick to Resign”.

Sometimes a Senior Executive will not be motivated to leave their current role as a result of pull factors; rather, they may feel pushed to depart, owing to untenable conditions within their workplace. Such conditions could include a breach of the Executive’s contract (including the important implied term of trust and confidence) or the Executive suffering discriminatory treatment, or being victimised, as a result of asserting a workplace right, including exposing unlawful or unethical activities in the business.

Whilst undoubtedly tempting to depart swiftly in such circumstances, particularly if the Executive is a director, with fiduciary duties, or if they have managed to secure alternative employment, it is important to remember that an Executive who has suffered unfair treatment, or a detriment, may have significant protections and potential claims available to them. It may be necessary to assert those rights whilst still employed or to articulate them in a certain way at the point of resignation, in order to give the Executive significant leverage to negotiate valuable concessions, or increased compensation on their departure.

Furthermore, careful analysis is required where asserting that the employer has fundamentally breached the contract entitling the Executive to accept the breach and resign. If this analysis is not undertaken, the Executive could find themselves in the unfortunate situation of having resigned and then finding that in fact there was no fundamental breach, or there was, but they have not resigned in response to it, thereby losing any potential claim for constructive unfair dismissal.

Even more important, where relevant, is a careful analysis of equity and carry schemes, where a mere resignation (which does not amount to a constructive unfair dismissal) could make the Executive a bad leaver, with disastrous financial consequences.

In the case of an Executive who raises a grievance at the time of their departure, it is important to be mindful of the possibility that they may not be entitled to receive information from their former employer regarding the investigation or outcome, if any, of that grievance. Whilst there may be other avenues by which the Executive may be able to receive that information following their departure, it will, undoubtedly, be far easier to ensure an investigation is conducted, and that the Executive has appropriate input, if they remain employed.

When an Executive has raised a concern or grievance regarding their treatment in the workplace, particularly where unlawful discrimination is asserted, it may provide leverage for negotiation of more favourable exit terms, including a waiver or reduction of their notice period or post-termination restrictions, being accredited with good leaver status or receiving payment of compensation, or accelerated vesting of relevant awards.

There are likely to be a host of competing considerations for an Executive who is considering tendering their resignation, but it is worth bearing in mind that, once valid notice has been given by the Executive (which complies with any contractual requirements such as, for example, providing notice in writing), notice cannot then be unilaterally withdrawn by them. Executives must, therefore, be mindful of the risks of giving their notice without being adequately apprised of the options available to them. It is far preferable to obtain expert advice in advance and consider what rights could and should be preserved before an Executive acts in haste to their detriment.

If you are a senior executive or founder considering resignation, you have any other questions arising from this alert, or for specific legal advice on particular circumstances, please contact our Partner Merrill April who specialises in employment and partnership issues for multinational employers, senior executives, partnerships and partners.

Read our Little Book of Senior Executives: Appointments and Agreements here.

CM Murray LLP is ranked in Band 1/Tier 1 by Chambers and Partners and Legal 500, with ”a reputation that can’t be beaten for senior executive work” (Legal 500 UK 2021). Merrill April is “fast-thinking, forward-thinking and responsive” (Legal 500 UK 2021).