Canada: Resignation, Termination, Or Repudiation? Employee's Conduct Found To Be Incompatible With Continued Employment

In an earlier blog post, we wrote about an Ontario decision in which the defendant employer's conduct repudiated what otherwise might have been a lawful employment agreement. As we see in the Anderson v. Total Instant Lawns Ltd., the reverse scenario – an employee repudiating the terms of their employment contract – can also exist and defeat a claim for wrongful dismissal.

In this case, the plaintiff employee served as an office manager in accordance with the terms of a fixed-term employment contract. As office manager, her job duties included recording employee hours and preparing the company's payroll accordingly. Trouble arose when the CEO identified discrepancies in the payroll records and, in particular, with respect to the hours purportedly worked by the plaintiff's husband. When challenged, the plaintiff denied that her husband's hours had been overstated and refused to return to work unless he was paid for the hours she had recorded.  

That evening, there was a meeting at the plaintiff's home attended by most of the defendant's employees. The employees prepared a document they described as a "Strike Notice" outlining various demands including that "those who were wrongfully terminated, namely...Karen Anderson shall be offered their previous positions back at full pay and to the terms of their contracts should they still wish employment with Total Instant Lawns Ltd."  In addition, the notice demanded that the plaintiff's husband be paid his wages in full and that the plaintiff be given authority to schedule the workers without alteration by management.

Unsurprisingly, these demands were not met and the parties agree that the plaintiff's employment came to an end the following day. At trial, the issue was whether the plaintiff had left voluntarily or was terminated from employment.

The court considered four legal concepts in its analysis and outlined the applicable test for each as follows:

• Resignation: Whether a reasonable person would consider the employee to have clearly and unequivocally resigned
• Job Abandonment: The test for abandonment is similar to that of resignation. In considering whether an employee has abandoned their employment, the court can look to factors such as a failure to report to work, a failure to follow policies and procedures, relocation and a lack of intention to return.
• Repudiation: Whether an employer is justified in terminating the employment relationship based on repudiation requires an assessment of the context of the employee's refusal, in order to determine whether the employee refused to perform an essential condition of the employment contract or whether the refusal to perform job responsibilities was directly incompatible with his or her obligations to the employer.
• Termination: Whether a reasonable person would consider the employer's statement or actions to be a termination.

Justice Parfett ultimately dismissed the plaintiff's wrongful dismissal claim and held that she had repudiated her employment contract as she had no intention of returning to work unless certain conditions were met. This conduct amounted to an attempt to make significant changes to her job duties as outlined in her employment contract and, as such, was incompatible with her continued employment.

The takeaway from this decision is that neither employers (absent reasonable notice) nor employees can make significant, unilateral changes to the terms of an employment contract.

The CCP team can assist employers in navigating all aspects of the employment relationship, including terminations or changes to job duties.