Entitlements of Employees who Resign with an Extended Notice Period

April 3, 2012 | Jill W. Wilkie

In the absence of a contractual provision to the contrary, an employee must provide his or her employer with reasonable notice of his or her resignation. Occasionally, however, an employer may find itself faced with the question of how to handle an employee who has resigned and provided the employer with an excessively lengthy notice period. In these circumstances, an employer may wish to have the employee leave prior to the end of the notice period provided. Employers must be wary of their obligations to employees who are asked to leave prior to the end of an extended notice period.

Employers should first turn to their written contract of employment with the employee, should there be terms that govern this situation (provided those terms meet the minimum standards set out in employment standards legislation). In the absence of a written employment contract that speaks to this situation, employers must consider employment standards legislation along with the common law.

In each province in Canada, employment standards legislation sets minimum terms to govern employment relationships. Some employment standards legislation specifies the amount of notice that an employee must give when resigning, which sometimes includes a provision regarding expediting termination of employment after receiving an employee’s termination notice. Other provinces simply set out the minimum notice required to be given when employment is terminated by the employer.

Given that employment standards legislation only prescribes minimum standards, employers must also consider their common law obligations. When an employee resigns with a notice period and the employer communicates its desire to shorten that notice period, the courts have found that the employer has instead terminated the employment relationship. As a result, the employee is entitled to reasonable pay in lieu of notice, which is determined on the individual facts of each case, based upon the employee’s tenure, position, compensation, age, education, prospects of re-employment, etc.

There have been very few reported cases in Canada dealing with the above issue. One such case, from the Court of Appeal of Alberta, dealt with an employee who had resigned and had provided more than 6 months notice of his resignation. The employer terminated the employee and provided the employee with 8 weeks notice, relying upon its obligations under section 59(2) of the Employment Standards Code, R.S.A. 2000, c. E-9. The Court found that, due to section 3 of the Code (which states that the Code does not preclude employees from seeking remedies at common law), the employee was not precluded from bringing an action for damages for wrongful dismissal and was entitled to a reasonable notice period [Smith v. Hostess Frito-Lay Co., [1994] A.J. No. 483 (ABCA)].

In Compton v. Triffo, 2005 SKQB 310, an employee submitted his resignation on September 3, effective October 3. The employer advised the employee that his last day of work would be September 19. The employee then sued for wrongful dismissal. The Saskatchewan Court of Queen’s Bench allowed the employee’s action and found that since the employer did not accept the resignation and instead sought to terminate the employment at an earlier date, the employee was entitled to reasonable pay in lieu of notice, stating that the change constituted constructive dismissal.

The oft-cited case of Oxman v. Dustbane Enterprises Ltd., [1988] O.J. No. 2067 (ONCA) contains similar reasoning. The employee resigned and provided the employer with 6 month’s notice. In response, the employer offered the employee a severance package with a shortened notice period. The Court found that employer effectively terminated the employment relationship, on the employer’s terms, when it offered the severance package, entitling the employee to a reasonable notice period.

If an employer elects to terminate an employee with a shorter notice period, upon receipt of the employee’s resignation with an extended notice period, the employer should obtain a release from the employee in exchange for pay in lieu of notice for the period offered by the employer. However, to provide certainty in the employment relationship, employers are well advised to have a written employment contract with each employee specifying the employer’s options upon receipt of the employee’s resignation notice, ensuring that those options are consistent with legislated minimums.

Disclaimer

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