Tag Archives: resignation

Resignation or Termination: Fixed Term Employment Contract

by Michael V. Coyle, JD*
This question often arises in termination cases: Did the employee resign, or was she fired?

Leaving aside the ‘constructive dismissal’ cases where the employee says that he/she was pushed into a corner where he or she had no other reasonable alternative except to quit, it may surprise you how often employers will say “I didn’t fire her, she quit” in response to a wrongful dismissal claim.

A recent decision from the Supreme Court of Nova Scotia sheds some useful light on that subject. It also affirms the law about the damages an employer will have to pay if it breaches a fixed-term employment contract.

In that case, a teacher in a non-union setting was discussing her continued employment with her employer. There was a difference of opinion about her teaching methodology. The meetings went badly. A few days later, the employer “accepted” the teacher’s “resignation” in an email. The teacher said she did not quit, although she was certainly thinking about it, and she maintained that she was fired when the employer “accepted” her non-existent “resignation”. She commenced an action for wrongful dismissal. The Judge agreed that she did not quit and ordered the employer to pay her to the end of her contract as damages for wrongful dismissal.

Resignation

This case reminds us that the test for whether or not the employee resigned is an objective one. That is, the question is not whether the employer subjectively believed in all honesty that the employee quit. The legal question is: “Would and objective, unbiased observer looking at all the circumstances think that the employee quit?”

Further, the law tells us that a resignation must be clear and unequivocal. It is not good enough for an employer to assume or believe that the employee resigned or for the alleged resignation to be read into the employee’s ambiguous words or conduct. It has to be clearly conveyed to the employer in unmistakable terms that the employee has quit his/her job.

The Court quoted this passage from the text “Employment Law in Canada”:

8:10 RESIGNATION

The test for determining whether an employee has resigned is an objective one. As Millward, J. stated: “Given all the surrounding circumstances, would a reasonable person have understood by the plaintiff’s statement that he had just resigned?”

 In order to tender an effective resignation, an employee must have the legal capacity to contract. An offer of resignation may be revoked before there is acceptance thereof. If a letter of resignation is not accepted as offered, it is not binding on the employee and does not terminate the employment relationship. An employee may resile from a resignation, provided the employer has not relied upon it to its detriment.

For an employer to successfully argue that an employee has resigned, the evidence must be clear and unequivocal that the employee has actually resigned. To be clear and unequivocal, the resignation must objectively reflect an intention to resign, or conduct evidencing such an intention.

It is easy to understand why an employer would be tempted to quickly “latch onto” a supposed resignation, as though it were “music to their ears”. It certainly makes the employer’s life easier if they can say, “I didn’t have to fire her, she quit.” It relieves the employer of both legal and moral responsibility to think that their “problem” has so conveniently solved itself. The difficulty arises when this belief turns into the employer’s mantra, and from that into their “position” in defence of a wrongful dismissal claim, without the benefit of objective analysis. I don’t know, of course, whether that is what happened in this particular case or not, but I’ve seen it happen in others.

Fixed Term Employment Contracts

This case, also reminds us that the calculation of damages for breach of fixed-term employment contracts is significantly different from the calculation used in the more usual open-ended employment contracts, which are generally unwritten.

The Judge in this case quoted the law as stated by other Nova Scotia judges in earlier cases:

The damages arising from termination of a fixed term contract was explained by Cacchione, J. [citation omitted] as follows:

 60. The measure of damages for breach of a fixed term contract is the recovery of wages the plaintiff would have received had the defendant performed the contract in the manner least disadvantageous to itself. In Employment Law in Canada (3rd) ed. (Butterworths Canada, 1998), the authors discuss damages under a fixed term contract by stating at 14.3:

Where an employee has been hired for a definite term, in the absence of just cause for summary dismissal he or she can be terminated only by full payment of the contract amount of wages.

61. In [citation omitted] Hall, J. was dealing with an action for wrongful dismissal under a fixed term contract. In addressing the issue of damages he states as follows at page 337:

This is not the ordinary case of wrongful dismissal where the court is obliged to fix the appropriate period of notice. The term of employment was fixed by the contract between the parties. The defendant breached that contract by dismissing the plaintiff without just cause. Subject to any reduction for failure to mitigate, the plaintiff would be entitled to recover for the unexpired term of the contract or $46,000 as claimed by her counsel.

Accordingly, the Judge in this case ordered the employer to pay the employee the balance owing under the contract to its end. This was probably significantly more than an employee with this teacher’s length of service would have otherwise received had there not been a fix-term contract. As well, the Judge rejected the employer’s argument that she had failed to mitigate her losses by not looking for a job in another field even at minimum wage.

And finally, the Judge brushed aside the employer’s suggestion that the teacher was merely a “probationary employee” with this comment:

The Court does not accept that [the plaintiff] was a “probationary” employee as that term is typically understood. As [her supervisor]confirmed in his evidence, that term was utilized in the Memorandum of Agreement as reflecting that the School was not obligated, after the term of the contract, to re-hire [the plaintiff] in subsequent years. Even if she was “probationary” in the usual sense, the fact that this dispute involves a fixed term contract, would not impact on the calculation of damages.

While the dollar amount of the damages awarded was fairly small (because the employee’s salary was just $28,000 per year) the cost of proceeding to trial, plus costs and interest could have easily exceeded the damages as awarded by a wide margin.

Obviously, with the benefit of hindsight, the employer would have been much better off had it known that the teacher’s “resignation” was just wishful thinking on its part.

For more information on how this case might apply in your situation, please contact me.

*Michael Coyle is an experienced employment-labour relations lawyer and a neutral mediator and arbitrator based in Kentville, Nova Scotia. Information provided in this article is meant for general interest only and is not a substitute for legal advice about your own situation. Michael can be reached by email at michael@mvc-private-law.ca  For more information and tips on employment and labour law issues, visit his website at www.michaelcoyle.ca

©Michael V. Coyle, 2012