Human Resource Blog

Pay in lieu of notice

Tennessee, when an a employee resigns what does payment in lieu of notice mean?

Payment in lieu of notice just means payment instead of giving two weeks notice. It usually applies when an employee is being terminated (or fired), not when the employee quits. “In lieu of” simply means instead of.

Traditionally, in the past, employers gave workers two weeks notice when they were being laid off or fired. (Employees also gave employers two weeks notice when they quit.) However, some employers wanted to get rid of a worker more quickly, so they would give payment in lieu of two weeks notice. They paid the employee for the two weeks, but the employee left (was fired) immediately.

There is no law that employers or employees give two weeks notice. It is considered responsible for an employee to give two weeks notice when quitting, but it is very uncommon for employers to give two weeks notice when firing an employee.

Occasionally today when an employee gives two weeks notice, the employer will offer payment in lieu of notice. This means that the employee is not required to work the final two weeks, but is paid for them. This is very common when the employee is a salesperson. The thought process is that a less-than-committed salesperson is going to do more harm than good. However, there is no requirement that the employer do this. Legally, the employer can simply pay the worker for the time that he or she actually worked, and terminate them as soon as the employee gives notice.

This definition applies to all states, not just Tennessee.