Sunday, 27 July 2014

Resignation Does Not Relieve Employer of Statutory Obligations - Supreme Court of Canada

If an employee provides notice of his intention to resign on a future date, can his employer legally terminate his employment (i.e. fire him) before that date and not pay him? In a case concerning Quebec labour laws, Quebec (Commission des normes du travail) v. Asphalte Desjardins inc., 2014 SCC 51 (CanLII), the Supreme Court of Canada has said “non”.

Facts


The case concerned the issue of the interplay of the provisions of the Civil Code of Qu├ębec (“C.C.Q.”) and the legal requirements due to employees under sections 82 and 83 of the Act respecting labour standards, CQLR, c. N-1.1

The employee in question had been working for his employer since 1994. On Friday, February 15, 2008, he gave his employer three weeks’ notice of his resignation. The following Monday, February 18, after failing to convince the employee to stay with the company, the employer decided without any other formalities to terminate his contract of employment the very next day, February 19, 2008, rather than March 7 — the departure date announced by the employee.

Decision

As is set out in the summary of the case (what lawyers call the “headnote”) on CanLII, the Supreme Court of Canada ruled as follows:

A party may unilaterally terminate a contract of employment for an indeterminate term without giving reasons, but on condition that he or she give notice of termination to the other party in reasonable time in accordance with art. 2091 C.C.Q. The obligation under art. 2091 C.C.Q. to give notice of termination applies to both the employee and the employer, for the entire term of the contract.
Added to the principles established in the Civil Code are the standards provided for in the Act respecting labour standards, including the one set out in s. 82, which imposes an obligation on the employer to give written notice to an employee where it is the employer that terminates the contract of employment. This section specifies the duration of the notice period, which depends on the employee’s years of service. Absent such notice, the employer must pay the employee an equivalent compensatory indemnity in accordance with s. 83 of the Act respecting labour standards. In the context of this appeal, the Act respecting labour standards clarifies the employer’s obligations, and in light of its purpose, it should be given a large and liberal interpretation.

A contract of employment for an indeterminate term is not terminated immediately upon notice of termination being given in accordance with art. 2091 C.C.Q. The wording of s. 82 of the Act respecting labour standards confirms that the contract of employment for an indeterminate term is not terminated at the time of the notice. It is well established that a contract is not automatically resiliated upon receipt of a notice of termination and that the contractual relationship continues to exist until the date specified in the notice given by the employee or the employer. This means that even after one of the parties to a contract of employment for an indeterminate term gives the other party notice of termination, both parties must continue to perform their obligations under the contract until the notice period expires. This includes the obligation to give notice of termination set out in art. 2091 C.C.Q., which the other party must meet if he or she wishes in turn to terminate the contract before the notice given by the first expires.
It is inappropriate to deal with the issue of the effect of notice of termination from the perspective of renunciation. The notice announces the termination of the contract of employment: it does not authorize a departure from the principle that a party may not unilaterally cease performing its contractual obligations, to the detriment of the other party’s rights. In this context, the argument based on renunciation of the notice of termination is an unacceptable fiction. An employer who advances the date of termination of the contract after an employee has given notice of termination effects not a “renunciation”, but a unilateral resiliation of the contract of employment, which is authorized only as provided by law (arts. 1439 and 2091 C.C.Q.).
In sum, an employer who receives from an employee the notice of termination provided for in art. 2091 C.C.Q. cannot terminate the contract of employment for an indeterminate term unilaterally without in turn giving notice of termination or paying an indemnity in lieu of such notice. The notice given by the employee does not have the effect of immediately releasing the parties from their respective obligations under the contract. If the employer prevents the employee from working and refuses to pay him or her during the notice period, it is “terminating the contract” within the meaning of s. 82 of the Act respecting labour standards.

Commentary

Although the case concerned the Civil Code of Quebec and that province’s employment standards legislation, the salient points of the decision are equally applicable to Ontario employment standards.

As the Supreme Court of Canada observed:

The contract of employment is a synallagmatic contract — one that creates obligations to be performed by both parties — in which an employee undertakes for a limited period to do work for remuneration, according to the instructions and under the direction or control of an employer… A contract of employment can be for a fixed term or for an indeterminate term. The employer undertakes to allow the performance of the employee’s work and to pay the employee’s remuneration while at the same time protecting the employee’s health, safety and dignity. The employee is bound to perform his or her work with prudence and diligence, and faithfully and honestly.
More broadly, a contract is irrevocable: a party cannot resiliate it unilaterally except on grounds recognized by law or by agreement of the parties. The parties to the contract must therefore, amongst other things, respect its term. This principle also applies to a contract for an indeterminate term.
The power of unilateral resiliation provided for in legislation is an exceptional privilege whose intended scope is narrow. Where the contract of employment is concerned, the Civil Code provides for two circumstances in which a party may terminate the contractual relationship unilaterally. First, a party may unilaterally resiliate a contract of employment for a serious reason without giving notice regardless of whether the contract is for a fixed term or for an indeterminate term. Second, as in the instant case, a party may unilaterally terminate a contract of employment for an indeterminate term without giving reasons, but on condition that he or she give notice of termination to the other party in reasonable time in accordance with art. 2091 C.C.Q..
Added to the principles established in the Civil Code are the standards provided for in the Act respecting labour standards, the purpose of which is to correct the imbalance of power between employer and employee by establishing minimum standards for employees by means of provisions of public order.

While Justice Wagner’s comments were made with specific reference to articles of the Civil Code of Quebec, his comments are equally true of common law jurisdictions in Canada, including Ontario. Most of what Justice Wagner wrote echoes exactly that which this blog has said on the page What is Wrongful Dismissal? For that reason, readers on this side of the Ottawa River would be well advised to consider the Court’s reasoning and decision in this case.

Takeaways for those with Labour Pains

There are several key takeaways for both employers and employees that are equally applicable to Ontario law as they are to Quebec law:

  • A party may unilaterally terminate a contract of employment for an indeterminate term without giving reasons, but on condition that he or she give reasonable notice of termination to the other party.
  • Employment does not end on the date notice of termination is provided – this is especially important with respect to the issue of continuation of benefits, on this point see The Requirement to Maintain Disability Benefits on Dismissal.
  • If an employee provides notice of resignation and the employer wishes to end employment earlier it may do so, however the employee’s notice of resignation does not relieve the employer from respecting its statutory obligations imposed by the provisions of the Ontario Employment Standards Act, 2000.

If you are an employer and are considering ending the employment contract of one of your employees, whether he or she has already provided notice of resignation or not, it may be prudent to speak to an employer lawyer before doing so. The professional, experienced and cost-effective employment lawyers for employers at Ottawa's Kelly Santini LLP would be happy to be of service to your business or organization.

If you are an employee and you are thinking about leaving your current position or if you have been terminated it is likely prudent to speak with an experienced employment lawyer. The professional, experienced and cost-effective employment lawyers for employees at Ottawa's Kelly Santini LLP would be happy to be of service to you.

Contact Us

To reach the author of this blog, Sean Bawden, email sbawden@kellysantini.com or call 613.238.6321 x260. You may also use the contact box at the top of this page.

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As always, everyone’s situation is different. The above is not intended to be legal advice for any particular situation. It is always prudent to seek professional legal advice before making any decisions with respect to your own case.

Sean Bawden, publisher of Labour Pains, can be reached by email at sbawden@kellysantini.com or by phone at 613.238.6321.

Sean P. Bawden is an Ottawa, Ontario employment lawyer and wrongful dismissal lawyer practicing with Kelly Santini LLP. He is also a part-time professor at Algonquin College teaching Trial Advocacy for Paralegals and Small Claims Court Practice.



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