Canada: Can An Employer Waive The Employee's Notice Of Resignation Without Paying Any Indemnity? - The Québec Court Of Appeal Says It Can

Last Updated: May 10 2013
Article by Robert E. Boyd

The employer's duty to provide reasonable notice when terminating an employee without cause has its legal counterpart in the employee being required to give reasonable notice of resignation. Also, while the employee may claim damages in lieu of reasonable notice in the event of termination without cause, the employer, on the other hand, may claim from the employee any and all damages arising from his or her failure to provide reasonable notice before leaving the company.

In practice, the resigning employee is often asked by the employer to leave before the end of the notice period. It is generally assumed that, during such period, the resigning employee is in a position of conflict of interest or will not fully devote himself or herself to his or her duties. In Québec, until recently, an employer who decided to ask an employee to leave prior to the end of the notice period was required to pay his or her salary until the end of such period. In fact, the largely predominant case law tended to equate the employer inducing its employee to leave prior to the end of the notice period to a dismissal which gave rise to the employer's duty to pay severance to the employee. In such a case, employee's salary for the remainder of the notice period was deemed to be adequate compensation.

Recently, the Québec Court of Appeal1 overturned this general rule by deciding that an employer may waive a notice of resignation. The Court mentions that, in such case, the resignation becomes effective immediately and does not entail a duty on the part of the employer to pay severance. The majority2 of the Court of Appeal points out that the employee's duty to give notice of resignation provides protection to the employer as it allows for a reasonable period time to find, hire and train a new employee. However, the employer may waive such protection, in which case there is no reason why the resignation should become a dismissal giving rise to severance pay.

Facts of the Case

On a Friday, the employee submitted a letter of resignation to his employer giving three weeks' notice prior to leaving. The employee was leaving to work for a competitor. On the following Monday, the employer asked him to leave immediately and refused to pay severance.

The Commission des normes du travail, acting on behalf of the employee, claimed severance pay equal to the employee's salary for three weeks. The trial judge allowed the claim and concluded that the employer had dismissed the employee by requesting that he leave prior to the effective date of his resignation. Consequently, the employer was required to pay the employee an indemnity in lieu of notice. In so doing, the trial judge applied the largely predominant case law according to which termination prior to the end of the notice period was deemed to be a dismissal.

Decision

The majority of the Court of Appeal analyzed the nature of the employee's duty to give reasonable notice of resignation. Just like a notice of termination by the employer, the notice of resignation is intended to allow the employer a reasonable time to react to its employee leaving. The employer has the right to receive reasonable notice of resignation. However, the Court of Appeal considered that nothing prevented the employer from waiving such notice. In this case, the mere fact of the employer waiving the notice should not turn a resignation into a dismissal.

The waiver of the notice of resignation by the employer has the effect of immediate termination of the employment relationship. Consequently, since the termination was initiated by the employee, the employer has no duty to pay severance or any other form of compensation to the employee.

The majority of the Court of Appeal recognized that its judgment might sometimes place the resigning employee in a difficult situation. Indeed, the resigning employee will be torn between his or her duty to give reasonable notice of resignation and the risk that the employer might waive it. In this latter case, the employee would risk unexpectedly finding himself or herself without remuneration for the remainder of the notice period. And what about employees giving notice to their employer of their retirement 12 months in advance? Do they risk losing their 12-month salary if the employer waives the notice? The Court of Appeal mentions that, in some cases, the employee may claim damages on the grounds that the employer exercised its right of waiver in an abusive manner. However, such a remedy remains hypothetical and would obviously involve costs and delays associated with legal proceedings.

In the end, the majority of the Court of Appeal decided that the employer may now waive a notice of resignation without being obligated to pay the salary until the end of the notice period. Only legislative amendments could change this situation.

In a strong dissent, one of the three judges of the Court of Appeal refused to endorse the principle that an employee risked losing his or her salary for the duration of notice period by reason only of the fact that he or she complied with his or her duty to give reasonable notice of resignation.

Discussion

This judgment of the Court of Appeal represents an important change in Québec employment law. Employers should now be made aware that they have no duty to allow their employees to work until the end of the notice period or to pay them severance during such period. Notice of resignation is a protection offered to the employer which it may waive without having to compensate the employee.

It is true that the Court of Appeal mentions that employers should not abuse their right to waive notice of resignation, and, to this end, the Court cites the example of an employee providing a 12-month notice of resignation. In such a case, the Court states that the employee might allege that the employer abused its right to waive notice of resignation and could file a claim for damages. Obviously, the Court of Appeal is clearly aware that its approach, in granting the employer the right to waive notice of resignation, might lead to inequitable situations where employees will risk losing their salary for the duration of the notice period merely because their wished to fulfill their duty to give a reasonable notice of resignation to their employer.

It will be interesting to see how this case will be applied by the courts. Some might say that the Court of Appeal has created some uncertainty. Employees will face the difficult dilemma of giving reasonable notice of resignation while running the risk that the employer might immediately waive their notice and forthwith discontinue payment of their salary. At the same time, employers will have to decide if they wish to waive the period of notice of resignation without any guarantee as to whether such waiver might represent an abuse of the employee. In that regard, the Court of Appeal does not provide any guidelines for employers to help them determine when their waiver of notice of resignation might be considered as an abusive exercise of a right which may give rise to a claim for damages.

In light of this case, employers may be well advised to seek appropriate counsel before waiving the employee's notice period and immediately ceasing payment of salary, especially where such notice is provided several months in advance.

Finally, it is interesting to consider the approach of the Ontario Court of Appeal in the leading case of Oxman v Dustbane Enterprises Ltd.3 In that case, an employee resigned and provided the employer with six months' notice. The employer refused to maintain the employment relationship for that long and notified the employee of his termination and offered him a severance package with a shorter notice than the six months tendered. The Ontario Court of Appeal held that the employer could lawfully waive the notice of resignation. However, in the Court's opinion, the employment relationship is not terminated by waiver of the employee's notice of resignation by the employer. If the employer wishes to terminate the employee, it is required to provide the employee with reasonable notice prior to his or her termination or compensation in lieu thereof. Under the circumstances, the Ontario Court of Appeal was of the view that reasonable compensation would be six months' salary equal to the initial notice of resignation provided by the employee. The Court's reasoning in this case is in line with the traditional approach of the Québec courts in those cases preceding the matter of Asphaltes Desjardins inc. c. Commission des normes du travail, according to which an employer's decision to terminate an employee prior to the end of the period of notice of resignation amounted to a dismissal requiring a reasonable notice on the part of the employer. As mentioned above, the Québec Court of Appeal no longer supports the idea that a resignation may be equated with a dismissal by reason only of the fact that the employer waived notice of resignation.

While some distinctions should be made between the employment relationship governed by the Civil Code of Québec and that existing in common law provinces, we believe that the matter of Asphaltes Desjardins inc. c. Commission des normes du travail might have a ripple effect in common law provinces, where the duty to give reasonable notice of resignation is based on the same principles. But until then, the Commission des normes du travail might seek leave to appeal to the Supreme of Court of Canada, given the importance of the rights at stake. At the time of publication, no motion for a leave to appeal has been filed, although the time period for doing so had not expired.

Footnotes

1 Asphaltes Desjardins inc. c. Commission des normes du travail, 2013 QCCA 484.

2 One of the three judges does not agree with the retained approach with regard to the possibility for the employer to reject the notice of resignation without the obligation to pay any compensation to the employee.

3 Oxman v Dustbane Enterprises Ltd, [1988] O.J. No. 2067 (ONCA).

The foregoing provides only an overview. Readers are cautioned against making any decisions based on this material alone. Rather, a qualified lawyer should be consulted.

© Copyright 2013 McMillan LLP

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