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Take a Break: Court of Appeal Rules that Employee’s Rescinded Resignation Still Interrupted Length of Employment

The Ontario Court of Appeal has overturned a trial decision and found that when an employee resigned from employment, only to rescind the resignation, the employer was permitted to enforce the employment contract entered into as a condition of “continuing” employment.

The facts in Theberge-Lindsay v. 3395022 Canada Inc. (Kutcher Dentistry Professional Corporation), 2019 ONCA 469 (CanLII), read like an exercise in an employment law foundations course.  The Employee was hired as a dental hygienist in 1993.  Over the years, the Employer underwent a number of restructurings, and required the employee to sign a new employment contract each time.  Each contract purported to limit the employee’s entitlements on termination to the minimum standards required by the Employment Standards Act.  On March 28, 2005 the Employee gave notice of her resignation, effective July 7, 2005.  Shortly before her resignation was to take effect, the Employee sought to rescind her resignation.  In fact she never stopped being an employee.  The Employer required her to enter into a new contract for employment, again limiting her termination entitlements to Employment Standards Act minimums.  Several subsequent contracts were executed, including one in 2011.  The Employer finally terminated the employee on a without cause basis in 2012, giving the Employee only one week’s pay in lieu of notice of termination in accordance with the Employment Standards Act, 2000 and the 2011 contract.

Some of the legal principles that immediately appear applicable to this fact scenario include:

  • An employment contract will only be valid if there is “consideration”.Consideration in this context means some benefit of value being gained by the employee in exchange for executing the contract. New employment constitutes consideration, but existing employees need to receive fresh consideration in order to validly execute a new employment agreement.A promotion, a salary increase, or a signing bonus each may constitute valid consideration. [See our blog HERE]
  • In order for an otherwise valid employment contract to limit an employee’s entitlements on termination, proper language must be included. [See our most recent blog on the topic HERE]
  • Multiple subsequent employment contracts generally will not be considered to each start a new tenure of employment.
  • An employee who resigns “in the heat of the moment” is usually granted a short “cooling off period” to rescind their resignation.

The Employee filed a claim for her entire common law notice entitlements as an employee dating back to 1993.  She was successful at trial, and won an award of pay in lieu of notice of termination at common law equal to fifteen (15) months’ earnings.

The Employer appealed that decision, attempting to convince the Court that the trial judge wrongly decided that each of the employment contracts were invalid.  The Court of Appeal did not accept that argument, noting the lack of legal consideration for each of the contracts, except for one.

In its brief decision, the Court of Appeal held that when the Employee gave notice of her resignation in 2005, she put an end to the employment relationship.  When she sought to rescind her resignation, the Employer was entitled to insist that the Employee be subject to a contract of employment in exchange for her employment from 2005 onward.  The Court held in part:

We agree with the appellant’s [Employer]s] submissions that Ms. Theberge-Lindsay’s [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 Dr. Kutcher. There was consideration for that new employment contract, that is, Ms. Theberge-Lindsay’s offer to again be employed by Dr. Kutcher 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.

Accordingly, the Employee’s entitlements were assessed as 7.5 weeks’ pay in lieu of reasonable notice as provided by the Employment Standards Act, 2000.  This recognized the Employee’s employment dating to 2005 when she entered into what the Court of Appeal considered to be new employment with the Employer subject to an enforceable and binding contract.

This case at first glance seems contrary to a case on which I blogged earlier [click HERE] where only a few months earlier the Court of Appeal chose not to enforce an employment contract entered into after an employee “resigned”.  The difference would appear to be that in the earlier case, the Court of Appeal considered the resignation to be something of a sham required by the employer.

The current decision should once again signal that it is important for an employer to obtain proper advice regarding the drafting and execution of an employment contract.  The professionals at CCPartners have significant experience with drafting and implementing employment contracts that will protect your interests, and provide clarity and certainty for all parties.

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