The dominant line of authority according to which an employer cannot waive an employee’s notice of resignation without paying a indemnity in lieu of notice has been restored by the Supreme Court in a decision issued on July 25, 2014.1 The Supreme Court thus overturned a Quebec Court of Appeal ruling in 2013 that broke with the prevailing trend in the case law.

Background

The employer, Asphalte Desjardins Inc., is a road paving company in the Basses-Laurentides region of Quebec. On February 15, 2008, a project manager, Daniel Guay, who had been with the company since 1994 as project manager, tendered his resignation, effective March 7, 2008. The three-week period between the date he submitted his resignation letter and the date of his departure would be used to finish up files and thereby ease the transition for his successor.

Because, in particular, Mr. Guay was going to work for a competitor, the employer decided to terminate the contract of employment on February 19, 2008, rather than wait until Mr. Guay’s announced departure date.

Decisions in the lower courts

The Court of Québec allowed a claim by the Commission des normes du travail under ss 82 and 83 of the Act respecting labour standards (LSA) and ordered the employer to pay an indemnity to Mr. Guay corresponding to the time between the date of notice and the effective date of Mr. Guay’s resignation, plus the corresponding vacation pay.

In a two-one majority decision penned by Justice Marie-France Bich, the Quebec Court of Appeal allowed the employer’s appeal, holding that the employer could waive the employee’s notice of resignation and thus did not have to give the employee reasonable notice of termination or an indemnity in lieu of notice. In reaching this conclusion, the appeal court reversed a prevailing trend in the case law of the Court of Québec to the effect that an employer cannot waive the notice given by a resigning employee without triggering the application of ss 82 and 83 LSA.2

The final verdict: Supreme Court of Canada

Considering the relevant provisions of the Civil Code of Québec (CCQ) and the LSA relating to termination of the employment relationship, the Supreme Court started by observing that the provisions of both statutes must be interpreted harmoniously. Then, pointing out that the purpose of the LSA is to protect the employee, who is generally the more vulnerable party to a contract of employment, the Court repeated that ss 82 and 83 of the LSA should be given a large and liberal interpretation.

Having established these principles, the Court observed that the notice of termination, either under Article 2091 CCQ or s 82 LSA, does not immediately terminate the contract of employment, but that the contract terminates definitively only upon the expiry of the notice given by either of the parties

Therefore, an employer who prevents a resigning employee from working during the notice period and stops paying him is unilaterally ending the contract of employment and must comply with the requirements of the CCQ and the LSA by paying an indemnity in lieu of notice.

Disagreeing with the reasoning of the majority in the appeal court decision, the Supreme Court held that the notice under the CCQ is not given solely for the benefit of the recipient, but serves the interests of both parties in that they benefit from a transition period. That being the case, it is incorrect to argue that the receiving party can waive it unilaterally without in turn giving notice.

The Supreme Court pointed out, however, that a distinction must be made between an employee who gives advance notice of his departure and an employee who resigns immediately but offers to stay on for a certain time. In the latter case, since the employment is terminated immediately, the employer may accept such immediate termination without paying the indemnity in lieu of notice under either the LSA or the CCQ.

Conclusions

This decision of our highest court thus ends the controversy stirred up by the appeal court’s ruling in this case. An employer that, for its own reasons, prefers to do without the services of an employee during the period of his notice of resignation has two options, which will depend on the length of the notice given by the employee:

  • continue to pay the employee during the notice period, but do without his services, or, if the notice period given by the employee is too long,
  • terminate the employment relationship by giving its own notice of termination or an indemnity in lieu of notice, which should theoretically comply with the provisions of the LSA and the CCQ.

In this regard the Supreme Court said:

Of course, the notice period chosen unilaterally by the employee cannot be “imposed” on the employer. An employer can deny an employee access to the workplace during the notice period, but must nonetheless pay his or her wages for that period, provided that the employee’s notice of termination was given in reasonable time. The employer can also choose to terminate the contract by giving notice of termination in reasonable time or by paying the corresponding indemnity in accordance with art. 2091 C.C.Q. and under ss. 82 and 83 of the Act respecting labour standards….

However, it is important to point out that in this case the CNT had only claimed the salary corresponding to the remaining portion of the three-week notice given by the employee, not the full four weeks of the notice that the employer would have had to pay the employee in order to terminate the contract of employment. Since no representations were made by the parties on this point, the Supreme Court refused to rule on whether the notice of termination under the LSA is a matter of directive or protective public order, a question which has come to the fore since the decision in Commission des normes du travail c 7050020 Canada inc.3

If the notice of resignation given by the employee is shorter than the notice he would be entitled to under the LSA, the employer will want to pay only the lesser amount. But what will happen if the notice of resignation is longer than the notice required under the LSA? In our opinion, adjudicators will have to consider the notice of resignation in assessing what constitutes a reasonable notice of termination or indemnity in lieu of notice.

It will be very interesting to see how the courts apply the teachings of the Supreme Court in this matter.