Dismissal or resignation: the legal issues

In unfair dismissal cases there is often a very fine line between whether an employee was dismissed or resigned. Here is that dilemma on show in such a case.

“Legislative framework

[48] Section 386(1) of the Act relevantly provides that a person has been dismissed if:

“(a) the person’s employment with his or her employer has been terminated on the employer’s initiative; or

(b) the person has resigned from his or her employment, but was forced to do so because of conduct, or a course of conduct, engaged in by his or her employer.”

[49] Section 386 of the Act has created two clear grounds on which a claim could potentially proceed. In Bupa Aged Care Australia Pty Ltd T/A Bupa Aged Care Mosman v Shahin Tavassoli, the Full Bench expanded on the content of the two limbs:

“(1) There may be a dismissal within the first limb of the definition in s.386(1)(a) where, although the employee has given an ostensible communication of a resignation, the resignation is not legally effective because it was expressed in the “heat of the moment” or when the employee was in a state of emotional stress or mental confusion such that the employee could not reasonably be understood to be conveying a real intention to resign. Although “jostling” by the employer may contribute to the resignation being legally ineffective, employer conduct is not a necessary element. In this situation if the employer simply treats the ostensible resignation as terminating the employment rather than clarifying or confirming with the employee after a reasonable time that the employee genuinely intended to resign, this may be characterised as a termination of the employment at the initiative of the employer.

(2) A resignation that is “forced” by conduct or a course of conduct on the part of the employer will be a dismissal within the second limb of the definition in s.386(1)(b). The test to be applied here is whether the employer engaged in the conduct with the intention of bringing the employment to an end or whether termination of the employment was the probable (sic) result of the employer’s conduct such that the employee had no effective or real choice but to resign. Unlike the situation in (1), the requisite employer conduct is the essential element.” 4


[50] The question before me is whether the Applicant was dismissed. For the reasons set out below, I am satisfied that she was not dismissed within the meaning of the Act but rather, by 16 October 2020, had resigned her employment.

[51] There is a confusing melange of circumstance and fact in this matter and my principal task has been to determine if there has been a dismissal. Based on the evidence before me, I am satisfied that on the boat ride back from Moreton Bay on 16 October 2020, the Applicant told Dr Escott that she had decided to do something different the following year. This conversation followed on from the Applicant’s resignation from the Board in July 2020 and her email on 10 August 2020 which stated, “I propose that I complete my current projects and commitments, finishing my employment with Codebots in 2 months’ time on the 16th October”.

[52] Dr Escott quite reasonably took this statement on 16 October as a final confirmation that the Applicant was resigning . Dr Escott had been determined to try and create a suitable role in the organisation following on from the Applicant’s resignation from the Board and then her written resignation on 10 August 2020, however nothing that he offered was acceptable to the Applicant. Dr Escott proceeded on that basis that her statement of departure confirmed her written resignation earlier and was the Applicant’s final position. Conversations ensued which saw the Applicant’s termination date pushed until the end of December that year. The evidence does not suggest that the Applicant’s resignation was made in the heat of the moment. The parties had been in discussions since at least August 2020, regarding the Applicant not being entirely happy in her employment and wanting to explore opportunities. Her resignation video evinces her desire to pursue her new-found passion in a different area. Additionally, I accept Dr Escott and Mr Robinson’s evidence to the effect that Dr Escott had tried to convince her to stay. All these factors suggest that the Applicant’s resignation did not occur in the heat of the moment.

[53] A separate issue regarding how the Applicant’s shares arose which complicated matters. It seems clear from the evidence that the Applicant, having only appreciated that she would be called a bad leaver and incur a financial penalty in respect of her Second Share Parcel after her resignation, sought to combine the two matters. In her evidence, the Applicant stated, “nobody in the company even knew about the bad leaver clause.  It was a surprise to everybody”. It is hard to understand how that can be so, given she had signed the Shareholders’ Deed willingly and voluntarily. She was a co-founder of a start-up company and not someone who was naïve and unfamiliar with the importance of contracts and of reading them before signing them. It is thus curious why she did not consider the impact of the Shareholders’ Deed before resigning, particularly given she had been the Chair of the Board and had benefited from the recent capital raising and knew that all the shareholders from the recent capital raising were bound by the same agreement.

[54] All that said, her evidence seemed genuine that the two issues – her resignation and the shares – were inextricably linked in her mind. The threat of the financial penalty and the fact that she would be categorised as a bad leaver prompted the Applicant to link the departure from employment as being contingent upon a solution being reached in respect of the Shareholders’ Deed. The difficulty she faces, however, is that the authorities demonstrate that once the resignation has been given, it can only be withdrawn with the consent of the employer.

[55] For example, in Delarouche-Souvestre v Public Transport Corporation, Commissioner Holmes quoted Gray J in the following terms:

“…in Birrell v Australian National Airlines Communication [1984] FCA 378. His statement of the law in relation to the giving of notice and the unilateral withdrawal thereof is most apposite. In relation to the first matter His Honour stated that:

‘The giving of notice of termination of a contract, in accordance with the terms of that contract, is a unilateral right. Its exercise does not depend in any way on the acceptance or rejection of the notice by the other party to the contract. The giving of such a notice operates to determine the contract by effluxion of the period of notice.’

It is clear that such a notice could be withdrawn by the consent of both parties to the contract; it seems unnecessary to determine whether, in the case of withdrawal of a notice by consent, the existing contract continues or a new contract comes into being. A question does arise, however, whether unilateral withdrawal of a notice is possible.’” 5

[56] Gray J considered a number of authorities in respect of unilateral withdrawal and concluded that:

“These authorities all support the view that unilateral withdrawal of a notice of termination of a contract of employment is not possible. In principle, this conclusion must be correct. The purpose of providing in a contract for a period of notice of termination is to enable the party receiving the notice to make other arrangements. An employee given notice by his or her employer has a period of time in which to seek another job; an employer who receives notice has time to arrange for a substitute employee. It would be harsh if arrangements so made during the running of the notice could be disrupted, and parties could be held to their contracts by unilateral withdrawal of the notice at the last minute. Such withdrawal, if possible, could lead to an employee being bound by contracts of employment with two employers, or an employer being bound by contracts of employment with two employees, each being required to give notice to one or the other in order to be extricated from this position, or possibly to suffer the requirement to forfeit or pay wages for a period of time. In my view, I should lean against the adaption of any principle which could lead to such an unfortunate consequences, and I should follow the authorities which tend to establish that withdrawal of a notice of termination of a contract of employment can only be effected by consent of both parties. This conclusion is consistent with authority to the effect that unilateral withdrawal by a landlord of notice to quit is not possible…” 6

[57] In light of these authorities, I am satisfied that the Applicant’s attempt to effectively withdraw her resignation – or prolong her exit until after an alternative agreement could be reached in respect of how the Second Share Parcel would be dealt with upon her exit from the company – was ineffectual given the Respondent never consented to such a course. All the discussions that occurred between the Applicant, Dr Escott and Mr Richardson in November and December related to the dilemma in respect of the Second Share Parcel. The extension to the end of January was her suggestion as per her email dated 3 November 2020 to mitigate the financial penalty effect of the bad leaver clause in the Shareholders’ Deed and buy time for the bad leaver issue to be resolved in her favour.

[58] As it happened, the Respondent did not agree to all the Applicant’s requests. They provided her with two draft deeds but she was not satisfied with the terms of either. Dr Escott and Mr Robinson became frustrated by the Applicant’s continued and more strident attempts to link the issues she faced in respect of the Shareholders’ Deed with the resignation, which they understood had already been clearly and unequivocally given. It is understandable that Dr Escott was perhaps blunt in his communication as the December departure date loomed and still the Applicant had made no announcement on her departure. They had agreed to her proposal to stay for one more month to mitigate the financial impact of the Applicant’s decision to leave but no formal agreement was reached in respect of the bad leaver provisions.

[59] The Applicant became uncomfortable with their resistance. She made allegations of bullying against Dr Escott. Having considered the evidence of both parties, I do not give much weight to these allegations though I accept the relationship between the parties became increasingly tense and uncomfortable.

[60] I have considered the possibility that even though the Applicant had resigned from the Board and indicated that she wanted to do something different the following year, this had been her simply expressing an ‘intention’ and an emerging view, not a formal resignation. She may have thought that in expressing that view she and the Respondent could work towards developing alternatives which included other roles that might interest her. The Respondent did in fact provide a number of alternative roles for her to consider however none of these came to fruition. That may have been the proper construction of events up until 16 October 2021.

[61] However, I accept Dr Escott’s evidence that on 16 October 2021 during the boat trip back from Moreton Bay, the Applicant confirmed that she did not wish to continue working for the Respondent the following year. This conversation occurred following her resignation letter on 10 August and numerous attempts to retain her in the organisation. After making that declaration, the conversations between the parties centred around an appropriate departure arrangements. The parties agreed that she would not substantially return to work in the new year. Subsequent discussions confirmed that her employment would officially end on 31 January 2021. The matters arising under the Shareholders’ Deed were separate. They had until her termination to be negotiated. Absent any formal agreement being made between the parties to displace the Shareholders’ Deed, that document was effective and capable of governing how the Applicant’s shares were to be dealt with upon her departure. The fact that the Applicant’s decision to resign triggered a consequence that she had not anticipated does not detract from the effectiveness of the resignation itself.

[62] In short, I find that the Applicant did resign and communicated her resignation in unequivocal terms to Dr Escott, at least by 16 October 2020. He accepted that resignation. The Applicant then sought to make her resignation contingent upon an agreement being reached with respect to the Shareholders’ Deed. However, in the absence of the Respondent accepting the Applicant’s withdrawal of her resignation, the Applicant’s resignation remained in effect.

[63] On that basis, the Applicant’s application cannot proceed because she was not dismissed within the meaning of the Act.

[64] Accordingly, I order that the matter be dismissed.”

Passages from Tansey v Codebots Pty Ltd (2021) FWC 6588 delivered 10 December 2021 per Lake DP