May 23, 2014
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Would you accept a cash payment to voluntarily resign from your job? A small number of American employees are given the opportunity to do just that. Recent attention has been given to these ‘Pay to Quit’ offers that have been provided, most notably, by online retailers Zappos and Amazon. While these programs are not adaptable to all workplaces (and have not yet appeared in Canada), their success will depend largely on purpose and implementation.

The Pay to Quit ‘social experiment’ began at Zappos as a $2,000.00 offer to new employees who agreed to resign after their training. Amazon announced this year that it would be borrowing this program from Zappos (a subsidiary of Amazon). Amazon now offers fulfillment center employees a one-time payment of between $2,000.00 and $5,000.00 to resign. The offer is made once a year to eligible employees.

Bribing employees to quit is clearly not the right approach for all employers. In order for the program to work effectively, the employer needs to have a desirable, high-commitment workplace, a strong corporate culture, a positive corporate brand and an effective screening process at the time of hire. It is essential for the company to choose the right employees and then to invest in their training.

The key benefit of Pay to Quit programs is that they help ensure that employees are committed, and reduce the usual costs of unhappy employees: turnover and lost productivity. For the employee, it provides an open opportunity to give the employer an annual performance review and to assess their own relationship within the company.

Both employers and employees however, need to be cautious. Ontario employers cannot view Pay to Quit programs as an alternative to providing employees notice and severance required under law. They should not be used as a tool to selectively target problem employees or a particular group of employees. Failing to apply the program in a uniform, across the board manner could subject the company to claims of constructive dismissal.

Employees, on the other hand, must be careful that they are not foregoing more advantageous legal entitlements by accepting the Pay to Quit offer. After acceptance, the employee would not likely be eligible for Employment Insurance, unless there are other factors that suggest the resignation was not truly voluntary. The employee should also be careful that they are not giving up a larger entitlement to a separation package (especially during times of corporate downsizing).

Although Pay to Quit programs have potential – in the right workplace – to be an effective talent management tool, both employers and employees should seek legal guidance before proceeding.

This content is not intended to provide legal advice or opinion as neither can be given without reference to specific events and situations. © 2017 Nelligan O’Brien Payne LLP.

Service: Employment Law