Thursday, March 24, 2005

Fired Vs. Being "Asked to Resign"

From the mailbag today:
Oh managerial guru, I have a question for you (DM: I'm blushing)

What is the point of asking someone to resign? Is this somehow a "nicer" resolution than firing somebody outright? Do you get to refuse to resign and then they fire you?

What is the point of this little semantical distinction?
Good question. While this is definitely a "nicer" resolution than going in and doing a "You're fired!", there are actually larger issues going on for both sides when a company asks an employee to resign:

For the employee:
Pro:
- Resume - This, for me, is the main reason to accept a forced resignation. To tell your next employer you "resigned" is a lot easier to explain since everyone quits jobs at some point ("I wasn't growing", "I wasn't promoted"). Saying you were "fired" can bring up warning flags that might give your next employer pause ("Was it for cause?","Did you steal?", "Did you harass?")

- Not Burning Bridges - Resigning is actually easier for the company (see below), so you can usually negotiate some intangible benefits versus being fired. For example you can do a "I will resign if you write me a letter of recommendation for my next job". This will, of course, depend on the exact circumstances of the situation and force you to swallow your pride, but you have to look at the big picture.

- Exit Package - If you are just fired, you don't have a lot of say in what severance package, if any, you will get. If you are asked to resign, the company is motivated for some reason to not just fire you, so this usually means you will have some room (not a lot) for negotiating your exit. But you have to consider this in relation to unemployment benefits (see below).

Cons:
- Unemployment Benefits - This is different for each state, so check with a lawyer in your area, but in many states if you resign you waive all rights for unemployment benefits. If you are fired for a reason other than cause, most states will allow you to collect benefits, although getting them after being fired may be a pain. In some cases, the best thing to do is negotiate a "layoff" rather than a "resignation" so you can collect unemployment, which goes back to the "Exit Package" negotiation issue above.

- Legal Rights - If you resign, you pretty much waive all legal rights you may have to sue the company for discrimination or other issues - or at least have a tougher time proving your case in court if the company can waive around a letter of resignation.

For the Company: Pretty much the cons above are obviously the company benefits, plus a few others
Pros:
- Unemployment Benefits - Depending on the state, if a company has unemployment benefits filed against it, their unemployment rates can go up. So if they can get an employee to resign and not file unemployment, there is a monetary benefit.

- No Legal Issues - As noted above, a resignation allows the company to pretty much close the file on you as it is much harder (but not impossible) to be sued if they have a letter of resignation in hand.

- Paperwork - In most states if a company fires someone there has to be a paper trail of why they did it to avoid snooping around by the State, which might take months to compile (some states are easier than others. California is probably the worst). So if you resign they don't have to worry about a paper trail.

- Morale - If they can tell remaining employees you "resigned", it helps morale versus if they have to tell everyone they fired you. Even if the "real" story of a forced resignation makes the rounds, it is still better on morale than an outright firing.

- Easier on Management - Firing people is hard. Very hard. Asking for and getting a letter of resignation is hard, but somehow easier. So this goes back to your "nice" comment.

Cons - I can't think of too many reasons why a company wouldn't want to ask for resignations, except in cases where they can't (mass layoffs which make them hard to manage, union contract issues), in situations where they WANT to make an example of a fired employee as a warning to others, and for those companies that are just clueless, but these circumstances are pretty unique.

To answer your last question, the answer is "yes", if you don't give them a letter of resignation, they can just fire you.

My recommendation is when told of the situation to ask for 24 hours to think it over and then get a local labor attorney to walk you through the pros and cons, specifically of unemployment benefits in your area. However, I think the best course is usually to take the resignation with a negotiated exit and move on.

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