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Court of appeal says no backpedaling allowed on employee resignation

resignation

Is an employer allowed to “re-hire” a long term employee on new terms if they retract their resignation? According to the Ontario Court of Appeal the answer seems to be yes. In a recent case, the Court  determined that where an employee provided unequivocal notice of resignation, and the employer accepted that notice, requiring the employee to sign a new contract if they wanted to retract the resignation is acceptable.

In Theberge-Lindsay v. 3395022 Canada Inc, the employee had worked for the employer since 1993 as a dental hygienist. When she was initially hired, she did not sign a contract of employment. In 1999, 2005, and 2011, the employee signed three different contracts of employment that purported to limit her entitlements on termination to the Employment Standards Act 2000 minimums. The reason for the new contracts was due to the employer’s re-structuring to obtain favourable tax treatment. Her job duties stayed the same. Except for the ESA minimum termination clause, nothing changed.

The employee was dismissed in 2012 on a without cause basis. She was provided 1 week of notice pursuant to the ESA. The employee commenced an action for wrongful dismissal. She was successful at trial. The judge found that none of the contracts were enforceable due to a lack of “fresh” consideration. The judge found continued employment, in and of itself, was insufficient consideration. She was awarded 15 months of reasonable notice.

On appeal, the Court agreed on this point of law and found the 1999 and 2011 contracts unenforceable but ultimately found that the 2005 was enforceable. In 2005, the employee planned to get married. She gave notice of her intent to resign and move to Guelph. The employer accepted her notice. Shortly before the effective end date, the employee’s relationship dissolved and she advised her employer that she would be staying on. Her employer was happy to have her but had her to sign a new contract. She did so.

The Court of Appeal found that the 2005 resignation broke the chain of employment starting in 1993. The employer was under no obligation to re-hire the employee after accepting her resignation. The Court found that she was entitled to ESA minimums, starting in 2005, or approximately 7.5 weeks.

The takeaway

In these circumstances, a new contract may be considered valid and binding on an employee who wishes to be “taken back”. It is worth noting that despite there being no change of duties, no ROE, and no substantive steps taken by the employer during the resignation “notice period”, the Court still considered the resignation to be effective. This case seems to follow on the heels of English v. Manulife, 2018 ONSC 5135, which found that once accepted an employee’s resignation is final and cannot be rescinded.

While it is interesting that the trial judge characterized the 2005 contract as a “retraction of resignation”, whereas the Court of Appeal found it to be a “re-hiring”, not much may hang on this. My take, and outlined by the judge in English, is that an employer was under no obligation to allow the employee to continue her employment past her prior resignation date. The characterization as a “re-hiring” or “acceptance of retraction” may be a distinction without a difference.

Although the employer was ultimately successful on appeal and limited the employee to ESA minimums, the Court has again found that “sign this or you’re out” will not amount to fresh consideration. Ultimately, parties attempting to modify their existing contracts of employment need to make sure they are providing appropriate and valuable consideration. What that means will vary from case to case.

Theberge-Lindsay v. 3395022 Canada Inc. (Kutcher Dentistry Professional Corporation), 2019 ONCA 469 (CanLII), can be found here: http://canlii.ca/t/j0v6b

Devan Marr

Devan Marr is a lawyer at Strigberger Brown Armstrong LLP. With two offices located in Toronto and Kitchener/Waterloo, the firm offers a full range of legal services to our industry partners in insurance and risk management. The firm aims to provide its clients with focused, practical, and cost efficient legal advice. Devan primarily defends insurance claims with a particular interest in the intersection of the contractual, statutory and common law obligations of parties in long-term disability and employment practice liability claims. His practice also includes providing employment related legal advice to both employers and employees in the context of contract negotiations, evaluation of termination clauses, workplace investigations, and assessment of exposure to wrongful dismissal claims.
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