When employees resign from their employment, they may be giving up their rights to various forms of compensation and employer-provided benefits. They also may be creating additional legal obstacles for their eligibility for unemployment benefits and for any future legal action they may intend to pursue. Thus, before quitting, employees must consider not just the immediate salary loss that resigning will cause, but also the additional financial impact their resignation may have.
First, employers offer a variety of compensation tools aimed at retaining their employees. These tools include, but are not limited to, annual bonuses, stock options, long-term incentive plans, company-exclusive investment accounts, PTO or vacation pay, and commission pay. Before resigning, employees must understand what effect resignation will have on their rights to these forms of compensation. Regularly, employers condition the employee’s receipt of bonuses and commissions on the employee’s remaining employed through the payout date for the bonus or commission. Leaving before that date may disqualify the employee from receiving any portion of the bonus or commission. Leaving before the vesting date of a stock option, or before exercising options that have already vested, may also disqualify the employee from significant compensation.
Therefore, it is imperative for employees to understand their rights to this compensation and how to maximize their receipt of it before they depart. Otherwise, employees may be walking away from tens, if not hundreds, of thousands of dollars that they have already earned.
Second, an employee’s resignation may impact the employee’s eligibility for unemployment benefits. In Minnesota, employees are generally eligible for unemployment if they are discharged from their employment for reasons that do not amount to “misconduct.” An employee who quits is presumed ineligible for unemployment benefits. However, employees can still be eligible if they fall within one of the exceptions. The principal exception is when an employee quits “for a good reason caused by the employer.” Examples of such good reasons include being subjected to sexual harassment, a hostile work environment, or a dangerous workplace. Employees who are subjected to significant decreases in hours or wages may also be eligible. In some circumstances, the employee is required to notify the employer of the workplace problem and allow the employer the opportunity to correct it before the employee can quit and be eligible for benefits. Given that many employees rely on unemployment when between jobs, it is vital to fully understand these eligibility issues before resigning.
Third, if the employer violated the employee’s legal rights during the employment, the employee’s resignation may hurt the employee’s ability to hold the employer accountable for its actions. To prevail on certain wrongful termination claims, the employee would have to show that the work environment was both subjectively and objectively intolerable. This is a high legal standard. Like for unemployment, employees may also have a duty to report the illegality within the workplace and provide the employer the opportunity to correct the problem before resigning.
For each of these issues, it is essential to know what is stake before you resign. If you have any questions regarding the effect your resignation may have on your right to employer-provided compensation, unemployment benefits, or your potential legal claims, please contact us. We regularly advise clients on these issues and would be happy to analyze the particular issues you are facing.
In the employment law field, Darren M. Sharp concentrates his practice on discrimination, sexual harassment, and retaliation claims with a portfolio of clients ranging from manual laborers to senior corporate executives. He also regularly enforces medical leave rights and protects from retaliation employees who refuse to engage in illegal conduct or who report such conduct. Another principal focus of his practice is analyzing and providing advice regarding employment contracts, non-compete agreements, and severance agreements.