For Canadian employers, navigating the distinction between resignation and termination can be complicated. If an employee resigns, there is no entitlement to severance. If an employee is terminated without cause, the employer is liable for termination pay (and possibly severance pay in Ontario and the federal jurisdiction). The Alberta ruling in Carroll v Purcee (2017 ABQB 211) highlights that mistakes in distinguishing between termination and resignation can be costly.
Plaintiff MC worked for the defendants, Purcee Industrial Controls Ltd and Purcee Industrial Ltd, for four years and eight months in Calgary, Alberta and Madagascar. MC's title was operations manager, with responsibilities including sales and business development. No written employment contract existed between the parties.
In 2012 business began to decline, as did MC's relationship with Purcee. In August 2012 MC tendered his resignation and requested a fair severance package. Purcee refused to accept the resignation and MC continued to work for Purcee.
In May 2013 MC advised Purcee that he wished to terminate his employment on "professional terms" and proposed a severance package. He followed up on this offer in June 2013 when Purcee advised that it would be ready to discuss the matter in "a couple of days". MC responded that he planned to move back to Canada with his family in July.
MC's employment ended on June 7 2013 when Purcee purported to accept his resignation. No reference was made to the proposed severance package. MC later sued Purcee, claiming that his employment was terminated without cause and, therefore, he was entitled to damages in lieu of notice.
The court found that MC had not resigned but was terminated by Purcee without notice and was owed pay in lieu of notice.
The court emphasised that in order for a resignation to be effective, it must be clear and unequivocal. To determine whether an employee has resigned, the court will apply both a subjective and an objective test. The subjective test considers whether the employee intended to resign. The objective test asks whether, given all of the circumstances, a reasonable employer would have understood that the employee had resigned.
In this case, the court determined that MC did not intend to resign from his position. Each time that he offered to resign, the offer was conditional on the negotiation of a severance package. This was important for two reasons:
- It is difficult in such circumstances to argue that the resignation is clear and unequivocal when it is tied to a proposal for terms of severance.
- It calls into question an employer's ability to accept a resignation (provided that it is valid), if the employer does not also accept the terms proposed by the employee.
Accordingly, MC's resignation was not clear and unequivocal, but rather was an invitation to discuss the terms of his termination. He was dismissed without cause and entitled to damages as a result.
In Canada, employers should be cautious about taking an employee's resignation at face value. The decision demonstrates that an intent to resign must be clear, unequivocal and unconditional. Where a resignation may not be clear, unequivocal and unconditional, the employer should follow up with the employee to clarify that he or she truly intends to resign. Further, the employer should obtain written confirmation of the resignation and give the employee an opportunity to discuss the reasons for the resignation before accepting it.
As in Carroll v Purcee, matters can be complicated when the employee attempts to negotiate a severance package before resigning. If an employer receives an offer to negotiate termination pay, it can either refuse the offer at the outset or negotiate the terms of the employee's departure. Purporting to accept a resignation with an outstanding offer from the employee could prove problematic.
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For further information on this topic please contact Hannah Roskey at Fasken Martineau DuMoulin LLP by telephone (+1 403 837 0610) or email (email@example.com). The Fasken Martineau DuMoulin LLP website can be accessed at www.fasken.com.
This update was reprinted with permission from Northern Exposure, a blog written by lawyers in the labour, employment and human rights group at Fasken Martineau, and produced in conjunction with HRHero.com.