Resign or Be Fired: Which Is Best?

​Troubling economic conditions brought on by the pandemic have led to record numbers of employee layoffs and furloughs this year. Employees—including those who work in HR—who strongly sense they may soon be terminated may try to get ahead of that decision by choosing to resign or be fired. This decision can impact their careers for years to come, say career advisors.

Many factors affect how the outcome of a termination plays out. There are dozens of hypothetical situations that might be part of an employee's situation. Among those are whether the company's decision is based solely on financial circumstances, such as being in the process of downsizing, reorganizing or cutting the budget. Or it may be based on the individual's performance. In that case, if the termination takes place during the employee's first 90 days or probation period, that may change the conversation, say HR experts.

Employees who refuse to work (or return to work) for fear that they could be exposed to COVID-19 are new to the "employee resignation" conversation. In that case, those employees could be fired and still be eligible to collect unemployment benefits, depending on the state where they live and work, said Phyllis Hartman, SHRM-SCP, principal at PGHR Consulting in Pittsburgh.

Many career advisors and seasoned HR professionals agree that the best route typically is to give an employee the opportunity to resign before being fired.

"Personally, I would advise the employee to accept the option to resign, unless they thought there was an illegal reason behind being let go [that] they wanted to pursue," said Nancy McKeague, SHRM-SCP, chief operating officer of the Michigan Health & Hospital Association in Okemos, Mich.

"Once an employee has been asked to resign or else been terminated, there has been a clear break in the relationship that generally can't be repaired," McKeague said. "If the employee agrees to resign, he or she would avoid escalating any ill feelings and may be able to negotiate a positive reference and/or a severance payment. But if the employee believes the termination is due to discrimination or retaliation, there may be sound reasons to refuse to resign. For example, if they reported safety violations and then were asked to resign, it could be viewed as retaliatory. And if it appears the employee was singled out due to gender, sexual orientation, race or age despite good performance, they may want to seek legal counsel before resigning."

Generally, when an employee is given these two options, to resign or be terminated, it's often a result of a poor fit with the organization or marginal performance, HR experts say. In those cases, it's usually best to preserve professional conduct and leave on the best terms possible under the circumstances.

"When looking for new employment, it's easier to explain why you decided to leave an organization than to explain why you were fired," McKeague said.

Headcount Reductions

In the current business environment amid the COVID-19 pandemic, many CEOs are looking to retool their workforce, in most cases to make it smaller and more efficient. "Part of this challenge for executives is making hard choices that result in eliminating certain jobs and then addressing how to deliver the message to impacted employees consistent with the organization's policy and prior practices," said Stacey Berk, managing consultant at Expand HR Consulting in Rockville, Md.

"Sometimes these changes are because of performance problems that haven't been formally addressed, or the position is no longer needed if the company's strategic goals changed," Berk said. "It is just a question of how the company arrived at the decision, communicated it and classified it."

Berk encourages clients to carefully sketch out their business justification for staff changes. "When they break the news to employees, they can discuss the need for the change, and we advise that they offer a separation agreement in exchange for severance to reduce the company's risk," she said, adding that giving employees a chance to resign, if the situation is appropriate, can be a wise move when offered with the stipulation that the employer will not contest unemployment.

"Always check your state's laws and unemployment determination process before making this offer, to ensure it will not delay eligibility," she said. "Offering for the employee to resign is often seen as a softer landing."

Deeper Meaning

Offering the opportunity to resign before a termination can be a complex situation to navigate, and there could be deeper reasons for why this offer is extended to certain employees, said Ashley Inman, SHRM-SCP, HR manager at HNTB in Austin, Texas.

"In some situations where there are performance issues, leaders have offered employees the chance to resign so their personnel files do not reflect involuntary termination," Inman said. Another factor to consider is if the employee has a relocation or noncompete agreement in place. Employers may also want to double-check their professional reference practices and verification of employment policies to determine what information will be provided about the employee.

When advising impacted employees, McKeague said, HR should encourage those employees to reflect on what happened during their employment over the past six to 12 months that may have prompted the conversation. And if they are in a probationary period that was initially defined in an offer letter, it may be a sign that there was a cultural misfit between both parties, she said.

Jonathan Segal, a partner at the law firm Duane Morris in Philadelphia, said it's important to make sure there is transparency and consistency in the employee's personnel file when stating the reason for the termination.

"By offering the employee the choice, this gives them the option on how they will want this documented," Segal said. "However, if the reason for termination is based on willful misbehavior—such as defiantly not wearing a protective mask—then the employer will want it stated as a termination and not a resignation. Don't give them the option. Some employers might think they are avoiding a problem by giving the employee the choice, but really, when a future employer for this employee inquires, it will look like you might be trying to hide something."

Outline Options Clearly

Berk suggested that to help employees make the decision between resigning or being terminated, HR should clearly outline the options. For instance, the company must decide if it will still provide severance with a resignation, as well as one or more months of paid COBRA health insurance, basic outplacement services and positive references per the company policy.

"As long as the employee is financially whole with the resignation, it's usually a good strategy to provide the option," Berk said. "When resigning, the employee may want to secure the employer's commitment not to contest unemployment. And they should ask if there is an opportunity to work with the organization as an independent contractor in the future and whether they are eligible for rehire."

Valerie P. Keels, SHRM-SCP, head of D.C. office services at Gavi, the Vaccine Alliance, in Washington, D.C., said, "If the need for separation is outside of the employee's performance, then they should definitely wait to be let go and reap the benefits of any severance package." She added that even if the separation is due to performance, and the employee has not received any advance notice of poor performance, "they may also request some sort of remuneration through a mutual agreement to separate and agreeing not to sue the organization for wrongful termination."

Keels said that this is particularly important if the employee is 40 years old or older or a member of a Title VII protected class, which could trigger legal action.

"If we're talking just cut-and-dried 'quit or be fired,' I would still suggest [being] fired," Keels said. "Most professionals can spin the termination as a poor fit with corporate culture, turnover in upper management, the organization's mission not aligning with personal values or any other such substantiation when being considered for another role down the line."

Unemployment Considerations

Filing for unemployment is the next important step for terminated employees. With unemployment claims (UC) rising during this high-volume period of layoffs, there is never a guarantee that an employee will be able to collect unemployment benefits, Hartman at PGHR Consulting said. Federal and state government backstops, such as unemployment insurance, have been both beneficial and fluid through the pandemic, and the benefits and terms continue to change.

"Employers can contest the claims because their tax payment for the UC fund goes up if a lot of people collect," Hartman said. "In a time when many people are collecting UC due to layoffs for the pandemic, employers may be more willing to try and contest. Often, employers can offer the option of resigning to save a hit on their UC funds. In this situation, employees might be able to resign and apply for UC, stating that they were forced to resign."

Keels added that although many employers will try to assert employment at will, "there are many protections under the law for employees, and with the right attorney, they could make life miserable and expensive for employers who are using that as the basis for termination."

Paul Bergeron is a freelance reporter who covers the HR industry.