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Termination of employment – strategies for senior employees leading up to your departure

Important issues to consider in the lead-up up to the termination of your employment

At some stage in every employee’s career, the time will come when that employee will need to move on. The decision to leave an employer – or have that decision forced upon you – is never easy, and the longer you have been with one employer, the more stressful it can become.

However, much of the stress of termination of employment can be reduced by better understanding the process and adopting a strategic approach to the exit negotiations. Only a small number of senior employee terminations should ever warrant the issuing of legal proceedings. Litigation is a graveyard and seldom will court-ordered damages outweigh the financial and reputational risks of embarking upon such an enterprise. The street-smart approach is to cut the best deal you can and move on.

That deal should be embodied in an exit agreement known as a Deed of Release.

Before addressing the key issues that every Deed of Release should contain, there is a miscellany of matters that repeatedly come up, usually prior to the point when an agreement is reached.

While not all of them may be relevant in your circumstances, most of them will. This will include the nature and monetary value of any payout that you are to receive and the extent to which your reputation is protected.

It is important to consider the following:

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Obtain early legal advice particularly regarding the terms of your Employment Contract

It is essential for an employee to obtain preliminary advice as to his or her legal position before attempting to enter into discussions regarding departure. It may well be that, after a careful examination of your employment contract, your employer is in a position of weakness.

It is even possible that you might not even have a written employment contract, or at least not a contract that relates to your current position. It is also possible that there may be a number of “pressure points” that you might be able to avail yourself of in an endeavour to reach a more favourable agreement.

You can back it in that, if the company is the first to approach you to discuss your exit, then they will have “got their ducks in a row” before convening any meeting.

There needs to be an early assessment of your contractual position, as that will materially affect the outcome of any exit discussions. You should do your best to (legitimately) delay any meeting to enable you to obtain such advice.

Adopt a conciliatory approach to the exit discussions

For as long as possible, you should avoid creating the impression that you are taking prior legal advice. To say to an employer that you are taking legal advice in the early stages of exit discussions is almost certainly going to be interpreted as an escalation. It will introduce an element of tension into what might otherwise have been an amicable low-key discussion. Better to create the impression that you are “muddling through”.

If the matter has got to the point where the company needs to be sent correspondence on legal letterhead, then so be it, but a “softly softly” approach should be adopted first.

Don’t ignore workplace vibes

You cannot afford to be naïve or inattentive regarding the dynamics of office politics or the direction the company appears to be taking.

Almost invariably, there will be “tremors” in the workplace before the “earthquake” strikes. The earlier that you can pick up on those developing trends or events, the sooner you can take preliminary advice and be better placed to have that “discussion” with your employer. Termination discussions with your employer that are likely to result in a notice of termination of your employment will usually take place at short notice. Be prepared for that meeting.

Be wary of escalating any argument to a higher chain of command

Out of a sense of frustration and revenge, some of our clients attempt to escalate the dispute above their line manager in the hope that someone further up the hierarchy will be able to “cut through” the dispute or difficulties.
In our experience, this seldom results in a resolution of the difficulties. It has the potential to embarrass your line manager, making it harder to reach an amicable outcome. Unless there are issues of financial mismanagement involving dishonesty etc., it is better if you work within the reporting framework you find yourself in to achieve the best outcome you can in the circumstances.

Maintain the chemistry

This brings us to the point of making every effort to maintain the “chemistry” between you and your reporting manager. It is quite possible that the relationship is toxic, and if that is the case, you may have already ignored the “tremors” and “vibes” referred to above.

Should that be your situation, then even more care is going to be needed in order to successfully navigate your way out of the company. However, if your relationship with your reporting manager is positive, or at least salvageable, then we would recommend a “charm offensive”. At the very least, you should adopt an approach that minimises friction and helps to engender confidence in you.

Don’t email office documents to your home computer

You should always assume that your email correspondence is the subject of company surveillance. In circumstances where your employer may already be considering the termination of your employment, this should never be forgotten. If you are caught emailing company documents to your home computer, then it makes it so much easier for them to adopt the “high moral ground” and terminate your employment summarily i.e. without notice.
Many of our clients have been caught out in this regard. If you feel that you need to take documents home or email them to your home computer or other personal devices in order to work at home, then you should obtain the prior written consent of the employer. Make sure that you send a confirming email to the employer that that is what you are doing.

That email should explain why it is necessary to transfer the documents to your home computer and why the work cannot be done in the office. If the reason for the transfer of such documents is because of any Covid lockdown, then say so.

If you are using any company-supplied laptop to communicate with legal or other advisors, then consider using an (end-to-end) email encrypted service.

Be wary of staff complaints

We have acted for many clients whose performance has been exemplary, and yet who find themselves the subject of complaints by staff members.

These will often be for allegedbullying and harassmentwhen all that has happened is that our client has been doing nothing more than exercising the managerial prerogative of attempting to address poor work performance. Reasonable management action carried out in a reasonable way is a recognised defence to bullying claims under the Fair Work Act 2009.

Allegations of this nature commonly arise in the context of performance appraisals or meetings to address underperformance/misconduct. The capacity of some disgruntled staff members who have a talent for deflecting the spotlight away from themselves and inciting a spirit of discontent amongst other team members cannot be underestimated.

To minimise the risk of false allegations of bullying, you should ensure the HR Manager is at least present (and preferably conducts) any staff appraisal meetings.

Novation has the potential to open up useful arguments for an employee facing termination of employment

You need to be mindful that, in circumstances where your employment has been transferred from one legal entity to another, this may have legal significance. This usually occurs between two companies within a Group that are jointly owned by a holding company.

Typically, it takes place like this: You commence employment with Company A pursuant to a written employment contract and then transfer to Company B. At the time when the transfer occurs, there is no new employment contract with Company B, and neither is there any (oral) agreement with Company B that your old employment contract with Company A will continue to apply.

In circumstances such as these, the law presumes that the old employment contract with company A has been extinguished. That would include all termination rights of the parties and restraint promises.

In circumstances where a novation can be said to have occurred, this has the potential of opening up useful arguments in favour of the employee. That can include that you are no longer bound by the old restraint covenants in the previous contract, and that you are entitled to a more generous notice provision at common law than the old contract provided for.

Returning expatriates facing termination of employment

If you are an expatriate employee in a foreign jurisdiction seeking to return to Australia at the end of your appointment, then special and more complex considerations will apply. This is particularly the case with respect to repatriation and relocation costs to Australia. There are also issues as to whether you are entitled to a redundancy payment if there is no position to return to upon your arrival in Australia.

As to whether these issues are addressed properly, or indeed even at all, will depend on the interaction of the Expatriate Service Agreement, International Assignment Policy, Redundancy Policy and Assignment Agreement. These documents would need to be reviewed before responding to any exit proposal of an employer.

Offence can be the best defence

Rather than waiting for the crisis to build and for the “axe to fall”, consider going on the “front foot” once preliminary legal advice is taken. Your line manager will probably be dreading having to discuss your exit with you.
Accordingly, if you can walk into your manager’s office looking relaxed – at least as best you can manage it – it may be possible to have a low-key discussion and achieve an outcome that you might not otherwise have achieved had you waited to be “summoned” to the boardroom.

You could open up that discussion by saying that you would like to have an “off the record” discussion regarding recent events. Use of the phrase “off the record” is probably less likely to cause alarm than the legal phrase “without prejudice”- although that is preferred.

You can then go on to outline the elements of the exit deal that you are seeking while at the same time expressing concern to ensure minimal disruption to the company or loss and inconvenience to the shareholders.

In suggesting this approach, you need to be mindful that it may well crystallise the exit discussion and bring forward the date of your departure from the company. Almost certainly, events will move quickly from that point on. You need to be ready for that.

Don’t accept oral agreement/handshake deals

Once you have reached an in- principle agreement with your line manager regarding exit terms, then you should stress that there is no binding agreement between the parties until each side has executed a Deed of Release.

This is important as you don’t wish there to be any confusion that what has been discussed and verbally agreed to does not in itself amount to a binding agreement. It is one thing to reach an in-principle verbal agreement but entirely another to express that in a clear legally enforceable manner.

Avoid the temptation for revenge

There is simply no denying that the termination of one’s employment is painful, and the longer one has been associated with the employer, the more difficult the separation is likely to be. This is never more so than in circumstances where you have consistently over delivered and “gone the extra mile” in an endeavour to benefit your employer. Very often, the act of termination feels like a betrayal of epic proportions.

As understandable as these emotions are, they must never be allowed to guide your strategic approach or control the way in which you negotiate your exit. The sooner that you can be reconciled that you must leave your employer, the better. The focus should be on reaching an agreement for the benefit of both parties and leaving on the most positive note that you can. You need to reach a point of achieving professional objectivity and being businesslike in negotiating your exit, just as you were in negotiating your entry into the employment relationship.

Entry terms in your Employment Contract will usually have a direct bearing on exit terms.

Every Australian executive needs to accept that the exit terms that they will be able to negotiate on the way out the door are in no small measure determined by the terms they accepted on the way in through the same door.
Every time you enter into an employment contract, you therefore need to have one eye on what the consequences may be at the time of your departure.

Negotiating an executive employment contract is always complex and requires a careful and diplomatic dance to achieve the best terms you can without risking withdrawal of the opportunity. The reality is that most executives will have to accept a compromise on the employment terms going into the relationship. Nevertheless, one has to accept that there may be a day of reckoning at the end of the employment relationship.

That doesn’t mean to say that it’s not possible to negotiate an outcome that goes beyond what your contractual position strictly allows. Achieving that outcome in part depends upon the contribution you made to the company’s bottom line while you were employed. It also depends on the relationships you have been able to maintain with key decision-makers within the company.

It is for this reason that we are recommending in this guide that you “maintain the chemistry” as best you can. We understand that this is not always possible and that toxic workplaces are common. Nevertheless, this approach is not to be misunderstood as being one of appeasement. Rather, it is grounded on the belief that your interests are better served by keeping open the channels of communication.

Don’t miss the opportunity to cut the best deal you can

You will only ever have one opportunity to document your exit from the company. You therefore need to ensure that the Deed of Release is the best agreement that you can achieve. The document will have long-term financial, career and reputational consequences.

Some employers will treat their exiting executives generously while others will not. Don’t assume that, just because you have significant tenure with your employer, this is going to be reflected in the payout. The company may still adopt a “barebones” approach in their discussion with you and simply offer what (in their view) is the least amount they have to pay you consistent with discharging their contractual and statutory obligations.

It is possible that the financial payout might not amount to any grand “El Dorado”. Yet, if the agreement adequately deals with the reputational consequences so as to minimise your “brand” damage arising out of the termination of your employment, then the whole exercise will be worthwhile.

One of the key objectives of any exit agreement should be to control the messaging. It should set out the reasons as to why you have left the company, and what will be said about you by the company to recruitment consultants and prospective employers. This means that you can participate in recruitment interviewing confidently knowing what your employer will be saying.

Final comments

To survive and hopefully prosper in a management role requires you to be attentive to office relationship and politics.

If, despite your best efforts, you sense that you are being marginalised, then take early advice. Events can move quickly and you may need to take action while you can still influence the outcome. At the very least, you need to be prepared for a “discussion” that may well have ramifications for the rest of your career.

While not all of the above factors will be relevant in your circumstances, many of them will probably be at play in some way or another. Depending on how these issues are handled and dealt with may well have a direct bearing on the form, shape and content of your own exit agreement.

So, what are the key issues that you need to address in any exit agreement?

For a detailed discussion regarding the key issues involved in negotiating a Deed of Release, see also the related article on this website Negotiating a Deed of Release.

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Call 1300 789 302 to speak to an employment lawyer. International calls +61 3 9653 9123

The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult a lawyer for individual advice regarding your own situation.