Releases may not protect employers from the tenured employee rule

November 10, 2014 Alison J. Bird Employee Relations, Employment/Labour Standards, Human Resources

In Nova Scotia, employees with ten years of service are provided with special protections under the Labour Standards Code. Section 71 of the Code provides that, subject to certain exceptions, an employer can only dismiss an employee with ten years of service or more for just cause. This is called the tenured employee rule.

A finding that an employer violated Section 71 can have serious consequences. In addition to the potential time and cost involved in defending a Labour Standards complaint, the employer may be ordered to reinstate the employee and provide them with back pay and benefits.

Despite the significant risks of dismissing an employee who is entitled to Section 71 protection, many employers will choose to take the risk and offer the employee a severance package in exchange for a release. Until recently, many employers have assumed that if the employee accepted their offer and signed the release, the release would protect them from a Section 71 complaint. However, a recent decision from the Labour Board has confirmed that this may not be the case.

In Demone v Composites Atlantic Limited, 2014 NSLB 163, an employee with more than 18 years of service filed a complaint that he had been dismissed in violation of Section 71. The Director of Labour Standards found that the complaint was barred because the employee had signed a release in exchange for 27 weeks of pay in lieu of notice. The employee appealed this decision to the Labour Board.

The Labour Board rejected the employee’s argument that the release was enforceable because he was under duress when he signed it. The Board noted that the employee took time to consider the offer, and he received legal advice before he signed the release. However, despite this conclusion, the Board found that the release did not bar the Labour Standards complaint.

The Labour Board’s decision turned on the principle enshrined in Section 6 of the Code that parties cannot agree to waive their rights under the Code by agreement, unless that agreement confers benefits greater than those provided by the Code. The Board concluded that the employer’s offer of pay in lieu of notice was not a greater benefit than the right to tenure under Section 71. As a result, the Board found that the release was invalid for the purpose of the Labour Standards Code and the employee was allowed to pursue his complaint.

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Alison J. Bird

Employment Lawyer at Cox & Palmer

Alison Bird is a lawyer practicing in Halifax with the Atlantic regional law firm, Cox & Palmer. Alison is growing her practice in the areas of labour & employment law and litigation. Alison is a frequent presenter on employment law topics and recently presented on the challenges being faced by employers dealing with changing demographics in the workplace. Read more