To Sue Or Not To Sue: Is Commencing A Lawsuit While On Working Notice A Repudiation Of Employment?

In this case¹, the employee was a Merchandiser and Logistics Coordinator with 30 years of service at an agricultural commodities trading firm. At the time of her termination from employment, she was one of two employees at the company (the other being the company's owner). She was provided 13 months working notice of the termination of her employment.

On April 8, 2025, the company's owner advised the employee that he was considering retirement and no longer wished to operate the business. He provided the employee with two options: (1) acquire the business for a nominal price and take over its operations; or (2) accept that her employment would be terminated once the business was wound down.

The employee retained counsel. On April 14, the employee's counsel sent a demand letter to the employer seeking 24 months notice.

On April 29, the employer formally notified the employee that her employment would terminate 13 months later, on May 31, 2026.

On May 5, the employee's counsel sent a second demand letter.

On May 14, the employee filed a civil claim for wrongful dismissal claim against the employer.

On June 17, the employer sent the employee a letter advising that, by initiating a lawsuit, she had repudiated her employment with the company, and that the employer was accepting her repudiation.

At trial, the employer took the position that (1) it had just cause to terminate the employee's employment on June 17, 2025, by virtue of her instructing her counsel to bring demands and commence legal proceedings against the employer while she remained employed; and (2) alternatively, the employee had repudiated the employment contract by the same conduct.

What Did the Court Decide?

No just cause in the circumstances...

First, the court found that in the circumstances, the employee's conduct had not amounted to just cause for her dismissal.

While courts have previously commented that an employee commencing litigation against an employer can constitute just cause for dismissal, there was no "bright line" rule in British Columbia that sending a demand letter or commencing litigation would always provide just cause for dismissal.

In considering whether just cause had been made out in the specific facts of this case, the Court found that the demand letters were reasonable attempts by an employee to negotiate her entitlements following receipt of an ambiguous plan by the company's owner for the business' closure. Among other things:

• the employee had provided a reasonable explanation for her choice to communicate through counsel rather than directly with the company's owner, and;
• the demand letters themselves were not "impolite" or "overly aggressive", and indicated the employee's willingness to negotiate.

Moreover, the litigation itself was not incompatible with the continuation of the employment relationship, particularly given that:

• the pleadings were "brief", "straightforward", did not contain any "scandalous" or "inflammatory" allegations, and;
• the employee primarily worked remotely and had limited in-person interactions with the company's owner.

... but the employee repudiated the employment contract.

While Justice Brongers found that the employee had been wrongfully dismissed, he did not end the analysis there. The Court proceeded to find that, by her litigation, the employee had repudiated her employment with the employer, even if this conduct did not amount to just cause for her dismissal.

In doing so, Justice Brongers followed previous jurisprudence from the British Columbia Court of Appeal that held that an employee who commences a wrongful dismissal action against an employer after receiving notice of termination of employment without cause during the working notice period "commits an unjustified repudiation of the employment contract", unlessthe employee can demonstrate that the employer had already constructively dismissed the employee or repudiated the employment contract first.

Justice Brongers found that the exception did not apply in these circumstances. By providing the employee with formal notice that her employment would terminate at the end of company's next fiscal year, the employer "was attempting to act in a manner consistent with the terms of the parties' written employment agreements", and that such conduct "is not constructive dismissal or repudiation by the employer, even if the period of notice given is ultimately found to be inadequate".

Accordingly, Justice Brongers concluded that the employee's choice to file and serve a wrongful dismissal claim on her employer while the working notice period was still in effect amounted to a repudiation of her employment agreement, which was accepted by the employer on June 17, 2025.

The repudiation had a significant impact on the employee's wrongful dismissal award: it was adjusted to reflect the notice period the employee would have worked through, had she not repudiated her employment.

In this case:

• the reasonable notice period was 24 months notice;
• the employee had only worked 1.5 months of the notice period (as her working notice ended the date the employer accepted the repudiation);
• the employee "effectively failed" to work through 11.5 months of her actual 13-month notice period, so;
• the 11.5 month period would be deducted from her reasonable notice period, leaving her with only a 12.5 month notice period.

Given that the trial occurred only four months into the claimed notice period, the Court also applied a "contingency reduction" of one additional month to account for the possibility that the employee would find alternative employment prior to the expiry of the 12.5 month notice period.

Takeaways

This case confirms that an employee's litigation conduct while working through a working notice period will have an impact on whether, in the particular circumstances, (1) there was just cause to terminate employment; and (2) the employee repudiated the employment contract, thereby partially limiting their ability to recover wrongful dismissal damages. This case is also an important reminder that providing working notice of termination may, in the appropriate circumstances, serve as a tool for employers to materially reduce their liability in subsequent wrongful dismissal litigation, so long as it is administered properly.