When does a resignation become a dismissal?

When does a resignation become a dismissal?

This is one of those situations that catches good businesses off guard.

On paper, it feels simple.

An employee resigns. They give notice. You decide it’s easier for everyone if they finish up early, so you pay them out and move on.

Clean. Efficient. Done.

Except… it’s not always that simple.

A recent Fair Work Commission decision has reinforced a point many employers still get wrong: if you bring forward an employee’s end date without their agreement, you may have just dismissed them.

And that small shift in classification can open up a whole new can of worms.

Let’s talk about what actually happened

In Terex Australia Pty Ltd v Cameron, the employee resigned and gave three weeks’ notice.

Same day, the employer said: “Thanks, but today will be your last day. We’ll pay you out.”

Most businesses would think that’s fine. In fact, many do it regularly.

But here’s where it unravelled.

The Fair Work Commission looked at one key question: who decided the employment end date?

• The employee nominated an end date
• The employer replaced it with an earlier one
• There was no agreement
• It was presented as a decision, not a choice

That was enough.

The Commission found that the employment didn’t end because the employee resigned. It ended because the employer stepped in and cut it short.

Which means… dismissal.

And importantly, the Commission didn’t care that the employee was paid out. Or whether they were happy with the outcome.

This isn’t about fairness in a general sense. It’s about control. Yikes.

Why this matters more than you think

This is where a lot of business owners get caught.

There’s an assumption that paying someone in lieu of notice gives you control. That it’s a commercial decision you’re entitled to make. (We all been there right!)

Sometimes that’s true. But only if you’ve got the right foundations in place.

Without that, you’re exposed to:

• Unfair dismissal claims from employees who otherwise couldn’t bring one
• General protections claims, which are broader and riskier
• Legal costs, time drain, and unnecessary stress
• Reputational damage, especially in tight industries where word travels fast

All because of a decision that felt operational at the time. Holy smokes!

Where this typically goes wrong

Let’s be honest, this doesn’t happen because businesses are reckless.

It happens because they’re trying to manage real life situations… Things like…

You’ve got someone leaving for a competitor and you don’t want them sticking around. Bye bye…

There’s tension in the team and keeping them through the notice period feels like a risk.

They’ve checked out mentally and productivity has dropped off a cliff.

So you make the call to end it early.

The intent makes sense. The execution is where it falls over.

So what should you do instead?

You’ve got options. You just need to be deliberate about how you use them.

1. Don’t assume you control the notice period

If the employee resigns with notice, that end date is theirs. You can’t override it just because it’s inconvenient.

2. Turn it into a conversation, not a directive

If you want them to finish early, position it as an option (not a directive):

“We’re happy to pay out your notice if you’d prefer to finish up earlier. Is that something you’d be open to?”

That one shift in language matters more than most people realise.

Because now you’re seeking agreement, not imposing a decision.

3. Lock it in properly

Verbal agreement isn’t enough.

Get it confirmed in writing. Even a simple email is fine, as long as it’s clear that:

• They understand the proposal
• They agree to the earlier end date
• It’s their choice

No ambiguity. No assumptions.

4. Check your contracts

Some contracts include clauses that allow for payment in lieu of notice.

But here’s the thing, not all of them cover resignations. And even when they do, they need to be drafted and applied carefully.

If your contracts are vague or silent on this, your risk goes up. If you need help reviewing yours we are right here!

5. Give your managers a heads up

This is where most issues start.

A resignation comes in. A manager reacts in the moment and says, “No worries, today’s your last day, we will finish you up early.”

That one sentence can create a legal issue.

Your leaders need to know when to pause and escalate before making the call. Training and education is key!

A better way to handle it in practice

Let’s compare the two approaches.

Risky approach:
“Today will be your last day. We’ll pay out your notice.”

Safer approach:
“We’d prefer you finish up earlier and we’ll pay out your notice in full. Are you comfortable with that?”

If so… then get it in writing to be sure!

Same outcome. Very different risk profile.

So what you might be saying… Is this a joke?

This isn’t about being overly cautious or bureaucratic.

It’s about understanding where the line is, so you don’t accidentally cross it.

Because once a resignation turns into a dismissal, you’re playing in a completely different space.

And the frustrating part?

It’s usually avoidable with a slightly better conversation and a bit of documentation.

That’s it.

No drama. No overcomplication. Just doing it right the first time.

Written by Emily Jaksch