When an employee hands in their resignation, it can feel like the situation is entirely out of your control. But as an employer, you have more rights and obligations than you might realise. How you handle those final weeks can have significant legal consequences for your business.
Whether you’re a small business owner dealing with your first resignation or a seasoned HR manager navigating a senior departure, understanding your legal position is essential.
Australian employment law gives employers a clear framework to follow. That framework covers notice periods, garden leave, final pay and restraints of trade. You just need to know what it says.
This guide walks through every stage of the resignation process from the employer’s perspective. The goal is simple: protect your business, treat your departing employee fairly, and avoid the missteps that lead to disputes or Fair Work claims.
Step One: Receiving and Confirming the Resignation
When an employee tells you they’re resigning, the first thing to do is get it in writing. A verbal resignation is technically valid under Australian law. But it creates ambiguity that can cause real problems later, particularly if there is any dispute about whether the resignation was voluntary.
Under the Fair Work Act 2009, there is no requirement for a resignation to be submitted in writing. As a matter of good practice, you should ask for written confirmation anyway. If the employee has already resigned verbally, send a brief email acknowledging the resignation and confirming the date it takes effect. This protects both parties.
It’s also worth knowing about constructive dismissal. In some circumstances, a resignation made under duress or in the heat of the moment may not be treated as a genuine resignation. If an employee later claims they were forced to resign because of the employer’s conduct, they may bring an unfair dismissal or general protections claim.
That said, constructive dismissal is a high bar for employees to prove. The employee must show they had no real choice but to resign. It generally takes something fairly extreme to establish. It’s also a phrase that is often thrown around by employees and frequently misunderstood. Still, it’s a risk worth being aware of, particularly if the resignation comes in the wake of a workplace dispute.
Related service: If you’re concerned about the circumstances of a resignation and whether it could expose your business to a claim, Prosper Law’s employment lawyers can advise you quickly. Visit prosperlaw.com.au/employment-lawyer to learn more.
Notice Periods: What Does the Law Actually Require?
One of the most common questions employers ask when an employee resigns is: do they have to work their notice? The short answer is yes, unless you agree otherwise.
The National Employment Standards (NES) under the Fair Work Act set out minimum notice periods. An employment contract can provide for a longer notice period than the NES minimum. It cannot provide for a shorter one. If the contract doesn’t include a notice period at all, the NES minimums apply.
So if the employee’s contract specifies four weeks’ notice, that is the period they are required to work. If the contract is silent, look to the NES and any applicable modern award or enterprise agreement.
Can you pay out the notice period instead?
Yes. If you’d prefer the employee to finish up immediately, you can agree to end the employment early and make a payment in lieu of notice. The payment must cover everything the employee would have earned had they worked through the notice period. We’ve covered this in detail in our article on payment in lieu of notice in Australia.
What happens if an employee refuses to work their notice?
If an employee leaves without working their required notice, you may be entitled to withhold payment for the unworked notice period from their final pay. But only if this is explicitly permitted by the employment contract. You cannot simply deduct wages without a clear contractual right to do so.
In some cases, an employer may also have a claim against the employee for breach of contract. In practice, this is rarely pursued for junior or mid-level employees. The cost and complexity usually outweigh the benefit. For senior employees or those in critical roles, it may be worth seeking legal advice about your options.
If you need to review whether your current employment contracts properly address notice obligations, our team can help. Take a look at our employment contract review service for more information.
Garden Leave: When It Makes Sense and How to Use It
Garden leave (sometimes called gardening leave) is a common and entirely legal arrangement. The employer asks a resigning employee to stay away from work during their notice period. The employee continues to receive their full salary and benefits. They remain employed and bound by their employment contract, but they are not required to come into the office or perform any work.
This is particularly useful when:
- The employee is moving to a direct competitor and you want to limit their access to clients, confidential information, or other staff
- The employee holds sensitive commercial knowledge and you want time to transition their responsibilities safely
- There is a risk of them attempting to take clients or colleagues with them
- The employee’s continued presence in the workplace could be disruptive or damaging to team morale
For garden leave to be enforceable in Australia, the right to place an employee on garden leave should ideally be written into the employment contract. Courts have found garden leave provisions to be enforceable even when not expressly stated. Even so, having it clearly documented removes ambiguity and reduces the risk of dispute.
During garden leave, the employee’s obligations under their contract continue to apply. What they can and can’t do during this period depends on what their employment contract says. If the contract contains confidentiality, non-solicitation or non-compete obligations, those obligations remain in force. An employee who breaches them may give you grounds for legal action.
Important note: Garden leave is different from sending an employee home on suspension pending investigation. Garden leave applies specifically during a notice period and requires the employee to continue receiving full pay. If you’re dealing with a misconduct situation, different rules apply.
Removing System Access and Collecting Company Property
Once a resignation is confirmed, one of the most immediate practical concerns is access to systems, data, client information and physical property. Getting this right is not just good IT practice. It can have real legal and commercial implications.
System and data access
There is no specific law in Australia that dictates exactly when you must revoke an employee’s system access upon resignation. However, under the Privacy Act 1988, you have an obligation to take reasonable steps to protect personal information held by your business. That includes protecting it from access by departing employees.
As a practical matter, you should review and adjust system access as soon as a resignation is confirmed. For employees on garden leave or immediate departure, full access should be revoked promptly. For employees working out their notice period, access should be limited to what is strictly necessary for their remaining duties.
You should also take steps to preserve any data the employee may have accessed or transferred in the lead-up to their resignation. This is particularly relevant if you suspect the employee may be taking confidential information or client lists to a competitor.
Company property
Company property must be returned by the employee before or at the end of their notice period. This includes laptops, mobile phones, vehicles, access cards, uniforms and any physical files or documents. The requirement should be clearly documented in your employment contracts and any resignation checklist you use.
If an employee fails to return company property, you may be able to deduct the value from their final pay. Again, this requires express contractual authority. Without it, you’re better off pursuing the matter as a debt claim rather than a unilateral deduction from wages.
Restraint of Trade: Can You Stop a Departing Employee from Competing?
Restraint of trade clauses are some of the most misunderstood provisions in Australian employment law. Employers often assume that because a clause is in the contract, it will be enforced. Employees often assume the opposite: that these clauses are never worth the paper they’re written on. The reality, as usual, sits somewhere in the middle.
A restraint of trade clause typically restricts a departing employee from doing one or more of the following for a defined period after leaving:
- Working for a direct competitor within a specified geographic area
- Soliciting or dealing with clients they served during their employment
- Poaching other employees from the business
- Using or disclosing confidential business information
Australian courts will enforce a restraint of trade clause, but only if it is reasonable in scope, duration and geographic reach. It must also go no further than necessary to protect a legitimate business interest. A clause preventing a junior salesperson from working anywhere in Australia in any sales role for five years is unlikely to be enforced. A clause preventing a senior account manager from approaching specific clients they managed, for six months, in a defined region? Much more likely to hold up.
If you believe a departing employee is about to breach a restraint of trade clause, seek legal advice immediately. Acting quickly is essential. If a breach is imminent or already occurring, it may be possible to seek an urgent injunction from the court. Our team regularly advises on restraint of trade matters. Learn more about our employment law services.
Final Pay: What Are You Required to Pay and When?
Final pay is an area where employer errors are surprisingly common. The consequences of getting it wrong can be significant. Under the Fair Work Act and the National Employment Standards, employees are entitled to receive their final pay within a specific timeframe. It must include several key components.
What must be included in final pay?
- All outstanding wages for hours worked up to the last day of employment
- Payment for any accrued and untaken annual leave (this must always be paid out, regardless of the reason for separation)
- Any accrued long service leave, depending on the relevant state law and the employee’s length of service
- Any applicable redundancy or notice pay, if relevant
- Payment for any accrued rostered days off (RDOs) if applicable under the award
Notably, accrued personal or sick leave is not required to be paid out on resignation in most circumstances. This is one of the most common misconceptions we encounter. Sick leave accrues, but it does not vest in the same way as annual leave.
When must final pay be paid?
The Fair Work Act requires that final pay be provided on the employee’s last day of employment, or as soon as practicable after. What “as soon as practicable” means depends on the circumstances. Most modern awards and enterprise agreements specify an exact timeframe, so check the relevant instrument.
Failing to pay final entitlements on time can expose you to an underpayment claim and penalties. If you’re unsure about what is owed or when, seek advice before the departure date. It is far better than dealing with a claim afterwards.
Prosper Law regularly advises employers on final pay obligations and underpayment disputes. If you have a complex situation involving long service leave, commission-based pay, or a senior employee with non-standard entitlements, our employment law team can provide clear, practical advice at a fixed fee.
Conducting a Handover and Protecting Business Continuity
One of the most practical (and often overlooked) aspects of managing a resignation is the handover. There is no strict legal obligation on an employee to conduct a thorough handover. However, their employment contract may include express obligations around transition assistance. Either way, it is always in your interest to make the handover as comprehensive as possible.
A well-managed handover should cover:
- A written summary of all active projects, clients and outstanding tasks
- Introduction of relevant contacts to the person taking over the role
- Transfer of logins, shared files and access credentials where appropriate
- Completion of any work that is within the employee’s capacity to finalise before their departure date
If the employee is being placed on garden leave, you will need to manage continuity without their day-to-day involvement. This is another reason why garden leave works best when it is planned for in advance rather than improvised at the point of resignation.
Handling the Emotional and Cultural Side of Resignations
Resignations aren’t just legal events. They’re human ones. How you respond to a resignation can affect team morale, your reputation as an employer, and even whether the departing employee becomes a future advocate or a detractor.
Where the separation is amicable, conducting an exit interview is good practice. It gives you genuine insight into why the employee is leaving. That insight can help you address retention issues before they affect others. It also signals to the broader team that you handle departures professionally and with respect.
Even where the resignation is difficult, it is important to remain professional. This applies especially where you suspect the employee may be going to a competitor or taking clients with them. Reacting emotionally, or taking punitive actions that aren’t legally justified, can quickly turn a manageable departure into a costly legal dispute.
When a Resignation Leads to a Legal Dispute
Despite best efforts, some resignations escalate into legal matters. The most common disputes that arise from resignation situations in Australia include:
- Unfair dismissal claims: If an employee argues they were forced to resign due to the employer’s conduct, they may bring an unfair dismissal claim before the Fair Work Commission. These must be filed within 21 days of the dismissal taking effect.
- General protections claims: These can arise where an employee claims their resignation was connected to the exercise of a workplace right, such as making a complaint or taking personal leave. General protections claims also have a 21-day time limit from the date of dismissal.
- Restraint of trade breaches: As discussed above, if a departing employee violates a post-employment restraint, you may need to seek urgent legal relief.
- Underpayment claims: Errors in final pay calculations can result in a claim to the Fair Work Commission or a civil court proceeding.
If you find yourself facing any of these situations, act quickly. Prosper Law’s employment team handles unfair dismissal claims, general protections matters and restraint of trade disputes regularly. We can help you understand your position and your options.
Key Takeaways for Employers
- Always get a resignation in writing and confirm the effective date.
- Enforce the contractual notice period, or agree in writing to an alternative.
- Consider garden leave for senior employees or those moving to competitors.
- Revoke system access promptly and document the return of company property.
- Check your restraint of trade clauses before the employee’s last day.
- Pay all final entitlements correctly and on time, including accrued annual leave.
- Manage the handover professionally to protect business continuity.
- If a dispute arises, get legal advice early.
Need Help Managing an Employee Resignation?
Prosper Law’s employment lawyers help Australian employers navigate every stage of the process, from notice periods and garden leave to final pay and restraint of trade enforcement.
Book a free 15-minute consultation today, enquire now!
Call us on 1300 003 077 or email us at enquiry@prosperlaw.com.au.
This article is intended as general information only and does not constitute legal advice. For advice specific to your circumstances, please contact Prosper Law.
About the Author
Farrah Motley
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