We have written in previous blog entries about the common law rules for reasonable notice of termination vs those laid out by law. Generally speaking, unless someone contracts out of common law reasonable notice, they could be entitled to a more generous period of notice or pay in lieu of. However, that’s not always the case. As we saw in a recent decision from the Court of Appeal for Ontario, an employee’s resignation and re-hiring may leave them with less entitlement to notice than they originally anticipated.
A long work history comes to an end
The employee began working for the employer, a dentist, in 1993. In the ensuring years he restructured his practice a number of times in order to minimize taxes and split income. On those occasions the employee was required to sign new employment agreements. Each of these agreements limited her entitlement for wrongful dismissal to the minimum as required by the provinces Employment Standards Act.
The most recent employment agreement signed by the employee was in 2011. She was terminated in December 2012. The employer gave her one week’s salary, which was the Act’s minimum, since her most recent employment relationship with the employer was so short.
The trial judge’s decision
The trial judge found none of the employment contracts signed since the employee started working for the employer were enforceable. The judge wrote,
“At all times between 1993 and December 20, 2012 the (employee’s) employment as a hygienist for (the employer’s) practice continued uninterrupted. It was (the employer) who consistently signed her pay cheques. The cheques were issued from (the employer) personally from 1993 to 1999, by 339 from 1999 to 2011 and by (the employer’s coporation) in 2012.
“In my view, none of the three employment contracts signed by the (employee) are enforceable. Each of the contracts fail respectively for lack of consideration. The evidence clearly demonstrates that the intention of (the employer) was that each of the three contracts needed to be signed or the (employer) could not continue to be employed with his practice. While there is no evidence of threat or duress, (the employer) was firm in his testimony that continued employment was conditional on the signing of the agreements. The (employee) and (a witness) both testified to their understanding of this fact pertaining to the 2011 agreement. The (employee) received no more from signing each of the three agreements but for continued employment. The fact that she received independent legal advice pertaining to the 2011 agreement does not negate this fact. Further, the three agreements, if enforceable, would substantially reduce the (employee’s) entitlements on termination.”
The employer appealed on two grounds. The first grounds of appeal were that the trial judge wrongly concluded the 2011 employment agreement was still binding. The court did not agree with this ground of appeal. However, the second ground of appeal was another matter.
The employee argued that even if the court agreed with the trial judge about the enforceability of the 2011 employment contract, the trial judge made an error in not considering the employee’s 2005 resignation as an event which broke the chain of her employment.
In 2005, the employee had notified the employer that she was engaged to be married and was planning to relocate with her to-be husband. She told the employer she had secured alternative employment and provided a last day she would be available to work.
The employee ultimately called off the wedding and remained employed by the employer. However, since she had resigned, she first needed to be re-hired. This resulted in the signing of an employment agreement.
The court determined that the employee’s resignation and securing of alternative employment amounted to an “unequivocal resignation” The court found the employee’s,
“unequivocal resignation and re-hiring in 2005 marked a break in the employment relationship after which an entirely new contract was reached between her and (the employer). There was consideration for that new employment contract, that is, (the employee’s) offer to again be employed by (the employer) and his acceptance of her offer to again employ her. On this basis, the Employment Standards Act, 2000 minimum notice is the maximum amount to which the respondent is entitled, measured from 2005. On this basis, she is entitled to 7.5 weeks of salary at $1,204 per week, less $1,200 severance already paid.”
If you have been terminated your first course of action following your dismissal should be consulting with a knowledgeable employment lawyer. Obtaining legal guidance will help you protect yourself and ensure that you are receiving the most optimal severance package.
At HMC Lawyers, we regularly review severance packages, help employees determine whether their package is appropriate, and if necessary, negotiate on their behalf for more compensation. We also represent employees in any litigation that results from a termination.
To make an appointment and get advice about an employment matter, including wrongful or constructive dismissal claims, call 1-800-480-3534 or contact us online. We represent clients in Calgary, throughout Alberta, and across Western Canada.