What to do when an employee won't work their notice period

Nick Stanley
By Nick Stanley

Notice period pic

What happens when an employee is about to finish employment with the business (either because you have decided to end the employment relationship or they have) and fails to turn up to work out their notice period?

This can be an inconvenience for the organisation and may cause major headaches, leaving you unprepared and short-staffed. You’ll probably have to quickly start the search for a replacement and meanwhile, the rest of the team has to pick up the slack. The person skipping the handover period further complicates things and may mean loose ends are left hanging and any processes or valuable learning they’ve made on the job go undocumented.

So what are your rights when an employee abandons the job without working the notice period? This blog post takes a good look at notice periods, how they should work and what your options are if they don’t.

What are notice periods?

“Giving notice” is when an employer tells an employee, in advance, that they are going to end their employment or an employee resigns. The notice period is the length of time between giving notification and the date the employment relationship actually ends, e.g. 3 weeks.

A notice period is always necessary and is usually specified in the employment agreement for all employees (including casual, part-time, and fixed-term). It could be based on the length of one pay period or how long it might take you to find a replacement.

The only time notice isn’t required is when the employer has good reason to dismiss the person without notice (also called “summary dismissal”) for serious misconduct, e.g. because they stole company property or took illegal drugs at work. You must still follow fair process in these instances.

If the employment agreement doesn’t define the notice period, fair and reasonable notice must still be given. This should take into account the person’s length of service, the type of job, how long it might take to replace them, and common practice in the workplace. Depending on the role, 2 to 4 weeks’ notice is considered fair.

Always give and get notice in writing.

Options instead of working out the notice period

Normally, the employee would meet the obligation to work for the notice period, but the employer and employee can agree to:

  • Pay the employee instead of them coming to work for some or all of the notice period (sometimes called “payment in lieu” or “garden leave”). This can only be done if it’s in the employment agreement or is agreed to by both parties.
    This is useful in cases where the person is being made redundant, is creating a distraction to other workers, or they have access to commercially sensitive information and is going to work for a competitor.
  • Waive all or some of the notice period if the employee asks or agrees. (This might happen if the employee is leaving for a new job and can start right away). In this situation, the employee won’t be paid for the portion of notice period they don’t work

Any agreement which deviates from what’s in the employment agreement should be in writing and signed by the employer and the employee.

During the notice period

The notice period gives the employee time to complete the work they can and hand over any remaining essential tasks to someone else. There may be some ill-feeling and strain on relations, depending on the circumstances of the termination, so try to remain objective and not let emotions hinder the process. Creating a plan with the employee will help ensure this is handled efficiently.

Part of the finishing and handover process should be the person organising and documenting any relevant procedures, insights etc, and showing someone where to find any files and documents (somewhere with shared access is best).

On the last day of employment, the employee should hand in any company property they have. The employer needs to:

  • Calculate and pay the final pay, including holiday pay etc. - either on their last day or no later than the next scheduled payday.
  • Retain any relevant employee information, e.g. tax information, wage, time, and leave records, performance information (if the employer has provided a reference), or information relating to any dispute between the employer and the employee.

We recommend conducting exit interviews, particularly if the resignation has come out of the blue. If there is disharmony between the employee and the employer/manager, having someone else run the interview is a good idea, so you can gain frank and honest feedback.

Some organisations like to run exit interviews via surveys, which is fine if this is a tick-box exercise, e.g. you want to know about retention and why people are leaving: is it for more pay or better benefits? But if you are looking to analyse it more deeply from a company-culture perspective, it’s best to run interviews in person, so you can ask questions and look further into what has caused the person to leave.

Learn more about ending employment fairly and safely.

Your rights if the employee doesn’t work out the notice period

While you can’t force employees to stay in their role if they want to leave, failing to turn up for the notice period is a breach of their responsibility to act in good faith. In the first instance, you should endeavour to keep lines of communication open and contact them to see if anything is stopping them from coming to work.

If this fails and the employee doesn’t work for the agreed amount of notice, you aren’t obliged to pay them for time after the last day they actually worked (but you cannot withhold or make any unilateral deductions from their owed wages or entitlements, e.g. unused annual leave).

If their employment agreement contains a forfeiture of wages provision, you may be able to deduct pay in lieu of notice from their final pay. You could also apply to the Employment Relations Authority (ERA) for damages or to ask the ERA to impose a penalty for the person breaching their employment agreement (by not working the required notice), which is legislated in the Employment Relations Act.

Be aware that any penalty will be paid to the Crown, but the ERA does have the discretion to order that some or all of it be paid to the employer. The potential costs for representation and time spent on seeking resolution with the ERA could likely outweigh any payment. Also, the case will become public record and may lead to unwanted media coverage for the organisation.

A word about forfeiture of wages provisions

Forfeiture of wages provisions work both ways, so employers who fail to give the required notice are liable to pay the employee wages in lieu of notice (just as an employee who fails to give notice is liable to forfeit wages).

Typically, the amount of the payment or forfeiture will relate to the period of notice - e.g. if the employee fails to work one week of the notice period, they forfeit a week’s wages - but the agreement may provide for a proportional payment or forfeiture for an incomplete period of notice, e.g. the balance of the notice.

The amount of wages to be forfeited must be a genuine estimate of, and in proportion to, the likely loss the business would suffer because the person failed to give proper notice, e.g. you had to get a temporary worker in to provide cover at a higher cost. Employers cannot treat it as a penalty or a threat (the forfeiture provision will be unenforceable in these cases).

To avoid the difficulty of proving loss later, you and the employee can agree to an assessment of potential loss at the time you enter into the employment agreement. For most businesses, this can be problematic and we only recommend including forfeiture of wages provisions when it is likely you will have the ability to clearly demonstrate costs incurred or financial loss etc.

If you are going to include these in your employment agreements, we recommend you seek expert guidance.

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