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Running a business means that you will be managing people daily. Looking after your employees is essential as your business will likely run better with more motivated employees. However, labour turnover will happen in any business, and you must be prepared when this happens. Usually, your employee will give you a resignation letter to inform you that they are leaving your organisation. This article will explain what you should do in this situation and how your business should react. 

What Is a Resignation Letter?

When your employee decides that they want to leave your business, they will draft a resignation letter. The resignation letter will detail why they want to leave the company and when they plan to leave.

Knowing how to react appropriately and professionally can be challenging for an employer. However, there are a few steps you can take upon receiving a resignation letter.

1. Check the Employment Contract

The structure of your employment contract will determine how you should proceed when receiving a resignation letter. If your employee is on a fixed-term contract and they want to break this, there may need to be a sufficient reason for this. A fixed-term contract is an employment agreement that is meant to last for a certain period of time. The contract may include a termination clause that allows the employee or the employer to cancel the contract if meeting specific circumstances.

These circumstances could be if the employee breaches the contract or if the employer cannot provide what the contract specifies. Alternatively, the termination clause could allow the employee to cancel the contract if they find a better opportunity at a different firm. As an employer, you must never forget your good faith obligation to your employees. Therefore, where an employee wishes to move onto a different job, you should not unreasonably try to keep an employee who is unwilling to stay. 

Additionally, it may be the case that the employment contract has no fixed end date. This means your employee can leave your business at any time. However, your employee must still give you sufficient notice. 

2. Ensure Sufficient Notice Is Given

Secondly, you should ensure that your employee provides enough notice before resigning. Your employment contract should specify the notice period, and it may differ depending on the job in question. The notice period is there so that you can find someone to replace your employee.

If your employee has not given you enough notice, they must stay in the job for that period of time before leaving. If they do not do this, they could be liable for breach of contract.

3. Enforce Your Restraint of Trade Clause

Some employment contracts might have a restraint of trade clause. This means that your employee must not work for another business in a similar industry or perhaps a competing business within geographical proximity to your business. A restraint of trade clause can also permit your employee to take a job in the same field whilst forbidding them from contacting any clients of your business. 

For example, a restraint of trade clause may restrict a lawyer from moving to another firm and taking clients to that new firm.

If there is a restraint of trade clause, it is important that your employee is aware of this and does not break this. They could be in breach of contract if they do not follow it. 

4. Accept Their Resignation

If there are no issues with the employment contract, you can accept your employee’s resignation. This means that your employee will cease working for you on the date the resignation letter specifies. 

Additionally, New Zealand employment law legally obliges you to accept your employee’s resignation if there are no extenuating circumstances. To accept your employees resignation letter, you must respond that you have indeed accepted it. This is best done in writing so that you can prove you have accepted the resignation.

Key Takeaways

A resignation letter will contain why an employee is leaving your business and when they expect to leave. The law states that a resignation letter does not have to be in writing, but it is always best to avoid confusion about what each party has said. When you receive a resignation letter, ensure that your employee is legally allowed to leave their position. By looking at their contract, you can determine the proper steps in relation to the notice period. You should also ensure that your employee is aware of any restraint of trade clauses. If they have followed the correct procedures, you can then accept their resignation. 

For any legal assistance with resignations, contact LegalVision’s employment lawyers on 0800 005 570 or fill out the form on this page. 

Frequently Asked Questions

Does the resignation letter have to be in writing?

No, but it is always best if the letter is in writing to clarify an employee’s intention to resign. 

Can an employer refuse to accept a resignation letter?

If there are no issues with the employment contract, you must accept your employee’s resignation letter.

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