Employee (Approved Person’s) resignation during an investigation

Individuals facing likely dismissal may resign in the hope that they can avoid having a dismissal on their employment record. They may attempt to resign with immediate effect, which would be in breach of their contract unless the employer agrees to accept it. The relevant business unit may be happy to allow the individual to resign immediately, in which case it can accept the early termination date. However, where the employee has committed misconduct, the organisation may wish to proceed with the dismissal proceedings during the employee’s notice period. The employee can be dismissed during their notice period for misconduct.

An employee who resigns whilst under investigation can cause potential problems and conflicting interests can arise between the business, legal/compliance departments and HR. Some parts of the business may be prepared to support the resignation (particularly if the individual is moving to the client side) but the compliance department may wish to demonstrate that appropriate disciplinary action has been taken against the individual. Considerations for HR and legal departments will be to ensure the firm is protected against employment claims by the individual. Therefore, a negotiated departure following without prejudice discussions with the intent to reach an agreed exit is often the solution.

This will often be in the form of a Compromise Agreement (soon to be renamed Settlement Agreement) which should cover key issues such as:

  • Waiver of employment law (and any other) claims: basically, to be valid this needs to comply with the requirements of section 203 Employment Rights Act 1996
  • Reference: any reference agreed with the employee must not contradict the reference the firm would give in accordance with its FCA obligations. The FCA takes a pragmatic view but will be keen to ensure that the individual is not treated as if he were a good leaver if that is not the case, and may take action against the firm if an agreed reference does not properly reflect the circumstances in which the individual resigned
  • The employee’s exit may have an impact on his entitlements, such as share options under an incentives plan, as many such schemes contain good leaver/bad leaver provisions. Negotiation regarding the firm’s discretion to decide that the employee is in fact a good leaver may be a primary motivation for the employee wanting to agree terms on exit
  • Confidentiality of the existence and terms of the agreement
  • Agreement that the employee will not to make detrimental statements about the firm
  • The employee confirming that there is no other action of the employee which would affect the firm’s decision to enter into the compromise agreement
  • Reconfirmation of restrictive covenants (if appropriate)
  • Employee to provide assistance to the firm in any future regulatory proceedings or litigation