Cooling Off Periods — Urban Décor Ltd v Yu 

Cooling Off Periods — Urban Décor Ltd v Yu

Ms Yu and Mr Jin worked as curtain makers for Urban Décor Limited (trading as Promax Colours) in its Auckland factory. On 10 December 2019 the two had a heated exchange with their boss, Mr Han, which culminated in the two stating they quit and leaving the factory in an emotional state. 

The pair raised claims of unjustified dismissal, the matter eventually proceeding to the Employment Court on appeal. The Court took the opportunity to helpfully set out the law relating to ‘cooling off’ periods – when, after a resignation, might the employer need to consider a ‘cooling off period’ before safely being able to rely on a resignation? 

The Court looked at the examples set out within the 1994 case Boobyer v Good Health Wanganui Ltd, which set out several common situations and the general approach the law at the time took: 

1. Cases where an employee gives an unambiguous resignation and later seeks to resile from it – in such a case the resignation cannot be withdrawn without the employer’s consent (provided there has been no breach of duty by the employer giving rise to a ‘reactive resignation’ or constructive dismissal). 
2. Cases where an employee had given an equivocal resignation – ambiguous words or actions leaving the employer unclear whether the employee had actually resigned. In this case, if it comes to the attention of an employee that the employer has misinterpreted their actions or words as a resignation they must quickly correct the false impression or suffer the adverse consequences of it. 
3. A third example illustrated is a situation where an employer seizes upon words neither intended nor reasonably capable of amounting to a resignation, or takes advantage of words of resignation known to be unwitting or unintended (and the employee promptly makes plain that they did not intend to resign) – in this case, the employer cannot safely rely on the resignation. 
4. Finally, and most relevant to Urban Décor, this is also the position the law took when words or actions of resignation formed part of an emotional outburst of frustration and it was obvious they were not meant to be taken literally – this turns on the facts of each individual case. 

The Court then turned to the more recent case of Mikes Transport Warehouse Ltd v Vermuelen which made four helpful observations: 

1. Firstly, that a resignation was a unilateral act – once notified (in whatever form) it is not open to the employer to claim that the employment relationship remains on foot and the resignation is of no effect.
   
2. Second, the Court noted an employee had no obligation to justify their decision to resign – no reasons are required, and it does not need to be demonstrably ‘well thought through’.
3. The key issue was whether, objectively, had the employee resigned. If held there was a resignation there was no legal obligation to ‘hold off’ recognising (accepting) that resignation, failing to do so could not amount to a dismissal.
4. Any concerns about whether a resignation arose from an employer’s conduct could then be addressed pursuant to the developed case law relating to constructive dismissal (the writer notes which is a very high threshold to establish, and one which is often misunderstood). 

The Court applied this objective analysis and determined the pair of employees had resigned – however, noted this was not the end of the inquiry, as an induced resignation may amount to a constructive dismissal. 

Ms Yu and Mr Jin argued they had been constructively dismissed – a breach of duty (the duty of good faith, allegedly breached by ongoing bullying and humiliation by Mr Han) had led them to resign. After analysing the matter the Court did not uphold constructive dismissal. 

This decision (Urban Decor v Yu), and Vermulen,  represents a shift away from requiring ‘cooling off’ periods – employees should think very carefully and be very conscious of their words and actions as once they have resigned they may not be able to take it back. 

 

If you would like to discuss cooling off periods further, please get in touch with the Watermark team directly. We are happy to advise you.

Jonathan Charlton

Senior Solicitor/Practice Manager