Facts
Decision
Comment


Facts

In the case of Shultz v Prococious Technology Inc(1) of the British Columbia Supreme Court, the plaintiff, Shelley Shultz, worked for the defendant company, Prococious Technology Inc, dba Cleardent for just under 13 years, though she had resigned once previously, and returned a year later.

Prior to her termination, the plaintiff created and presented a PowerPoint to the employer's co-directors, suggesting that a new position be created for her. Her presentation included statements such as:

  • "it's time to move on";
  • "I want to be part of the future";
  • "I want to stay with Cleardent"; and
  • "I must move for my mental and physical health".

The presentation caused confusion among the co-directors as to whether the plaintiff had resigned, though she confirmed that she did not. She was then provided with options of paid and unpaid leave but declined both. Ultimately, Cleardent terminated her employment without cause, which was the basis of her action.

For purposes of determining her notice period, the Court determined that her length of employment would be calculated from when she returned from her first resignation in April 2019. Her length of employment was therefore held to be two years and nine months.

In March 2021, the plaintiff received a promotion and a salary increase. Per the plaintiff's employment contract, her employment could be terminated without cause upon being provided "with only the notice or payment in lieu of notice (or a combination thereof) in the minimum amount" as required by the British Columbia Employment Standards Act (ESA). The plaintiff argued that the contract's termination clause had no legal effect because:

  • her duties and responsibilities had significantly changed, so Cleardent could not rely on the contract;
  • the contract itself was a retroactive document where she only gained a $416.66 monthly increase; and
  • there was a lack of fresh consideration.

Decision

The Court held that the employment contract was valid as it provided for a salary increase, which constituted good consideration for the duties and responsibilities required in her role. The Court further determined that she was entitled to a two-week notice period as set out in the termination clause of her employment contract. As she received this from the defendant, it was held that she was not wrongfully dismissed.

The Court did, however, go on to consider the plaintiff's common law notice if the termination clause had been found to be without legal effect. Based on her age and experience, it was determined that her common law notice would have been two months' wages in lieu of notice.

Validity of termination clause
Though the Court did not address it as an issue in its ruling, the termination clause in this case was a simple one that met the minimum standards set out within the British Columbia ESA. It is possible that, in another jurisdiction, the simplicity of this clause could have created another issue. For example, according to recent Ontario cases, an unenforceable "just cause" termination will invalidate an otherwise enforceable "without cause" termination provision. In such cases, an employer is also unable to rely on a "severability" clause with respect to the invalid provision, and the employer will be precluded from relying on the entire termination clause, allowing the employee to seek common law entitlements instead.

Employers should conduct careful reviews of the termination provisions found in their employment contracts to make sure they are drafted carefully to avoid such issues in potential litigation.

Comment

As this case illustrates, employee resignations can cause confusion among employers and human resources professionals. In some cases, it is difficult to tell from an employee's words or actions whether the employee has effectively resigned.

To assist employers, Canadian law has set out a framework for determining whether a resignation ends the employment relationship. The courts have outlined that a resignation must be voluntary, and must demonstrate an objective intention to resign. An employee's statements or conduct will be interpreted in the surrounding context and circumstances to assess whether a reasonable person would have understood that the employee had resigned. For an employer to argue that an employee has effectively resigned, clear and unequivocal evidence must be shown. This also includes a subjective consideration of the employee's state of mind at the time of the alleged resignation. For example, if an employee resigns in a state of anger or high emotion, a court may consider this in determining whether the employee has actually resigned. It is important for employers and human resources professionals to keep these considerations in mind when dealing with situations of employee resignations.

Given the difficulties that can arise in cases such as this one, employers are advised to seek legal assistance when confirming whether an employee's resignation can be given effect.

For further information on this topic please contact Jillian Frank or Qasid Iqbal at KPMG Law by telephone (+1 416 777 8000‚Äč) or email ([email protected] or [email protected]). The KPMG Law website can be accessed at www.kpmg.com.

Endnotes

(1) Shultz v Prococious Technology Inc, dba Cleardent 2022 BCSC 1420.