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Don't Jump the Gun!


By Hugh McPhail, Q.C.

Not long ago, we reported on a recent Supreme Court of Canada decision dealing with when suspensions with pay can sometimes be considered constructive dismissals.

On that same theme, it is worth noting the significant problems that can arise if an employer asks an employee to leave before a set term is up. This can arise in two cases: when a fixed term contract is about to end and when the employee has provided notice of his resignation.

The former situation was reviewed recently by the Alberta Court of Appeal in a case involving Cardel Homes LP. In that case, a second fixed term employment contract was about to end. One month before its end, the employee was advised by letter that his employer would not be entering into another employment contract with him. The letter also advised him that he would not be required to attend work for the remainder of the term of the contract, although he would be paid to the end of the term. The letter instructed him to immediately return the keys to his place of employment, his card key and his computer password. Unfortunately, the Court of Appeal upheld the decision of the trial judge that this amounted to "constructive dismissal". That was a conclusion with major consequences. The employment contract required the employer to pay a severance payment of 12 months' salary if the employment was terminated early. That is what the lucky employee was awarded. In order to avoid the inconvenience of another month of the employee working out the term, the employer paid a severe penalty.

The notice of resignation situation has not been addressed in a recent case but comes from a careful review of the Alberta Employment Standards Code. The Code, with some exceptions, requires employees with more than 3 months but less than 2 years' service to give 1 week notice of their resignation and employees with more service than that to give 2 weeks' notice. Employers on the other hand may owe up to 8 weeks of statutory notice of termination. If the employee gives the minimum notice of resignation (1 or 2 weeks depending upon length of service) and the employer asks him/her to leave early, the employer only owes the employee the balance of the resignation notice period. That makes sense. However, many will be surprised to learn what is stated in the Code (s. 59(2)) if an employee gives more than the minimum required notice of his/her resignation and the employer wants to terminate his/her employment earlier than that. In those cases, the employer must pay what would have been owing under the statute if it was the employer terminating the employment. So, taking for example an employee with 10 years of service: if he gave 3 weeks' notice of resignation but the employer asked him to leave after 1, the employer would then owe him not just for the balance of the resignation period (2 weeks) but for 7 weeks' pay for the balance of the 8 weeks' termination pay that would have been owing if it had been from the beginning an employer discharge.

The lesson in all of this is to be very careful before you ask an employee to leave earlier than he/she planned.

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