What is the Effect of a Resignation and Immediate Re-Hiring on the Employment Relationship?
The Ontario Court of Appeal recently decided a case in whether or not an employee’s unequivocal resignation and immediate re-hiring marked a break in the employment relationship.
The employee began working in the dentist’s dental practice in 1993.
Over the succeeding years, the dentist restructured his dental practice in various ways to minimize income taxes and split income. To maintain her employment with him, the employee was required to sign a series of employment agreements starting in 1999, all of which limited her entitlement for wrongful dismissal to the minimum required by the ESA.
In 2005, the employee tendered her resignation because she was engaged to be married to a man who lived in Guelph, Ontario and she had secured alternative employment in Guelph. However, prior to her last date of employment, she ended her engagement and advised the dentist of her intention to remain employed as a dental hygienist working in his office. The dentist told her that he was pleased to hear it as he did not want her to leave.
A month later she signed an employment agreement with the dentist that limited liability should it terminate without cause, to notice or payment in lieu of notice in accordance with the Employment Standards Act (the “ESA”). She continued her employment uninterrupted with the dentist.
In December 2012, the dentist, via his practice’s most recent corporate vehicle, terminated the employee’s employment without cause. She was given one week’s salary as the ESA minimum, since she had signed her most recent employment agreement only in 2011.
Lower Court Decision
The trial judge found that the employee was wrongfully dismissed and entitled to damages in lieu of reasonable notice under the common law, stating:
“In my view, none of the three employment contracts signed by the [employee] are enforceable. Each of the contracts fail respectively for lack of consideration. The evidence clearly demonstrates that the intention of [the dentist] was that each of the three contracts needed to be signed or the [employee] could not continue to be employed with his practice. While there is no evidence of threat or duress, [the dentist] was firm in his testimony that continued employment was conditional on the signing of the agreements. The [employee] testified to [her] understanding of this fact pertaining to the 2011 agreement. The [employee] received no more from signing each of the three agreements but for continued employment. The fact that she received independent legal advice pertaining to the 2011 agreement does not negate this fact. Further, the three agreements, if enforceable, would substantially reduce the [employee]’s entitlements on termination.”
The dentist appealed, arguing that the trial judge erred in failing to take proper account of the employee’s resignation from her employment in 2005. He claimed that the 2005 resignation broke the chain of the employee’s employment since 1993. She was required on June 30, 2005 to sign a new employment agreement in order to be re-hired July 1, 2005. Consequently, the dentist argued that, at best, she was entitled to the ESA minimum notice measured from the date that she was re-hired in 2005.
Court of Appeal Decision
The court agreed with the dentist’s submissions that the employee’s unequivocal resignation and re-hiring in 2005 marked a break in the employment relationship after which an entirely new contract was reached between her and the dentist.
The court found that there was consideration for that new employment contract: her offer to again be employed by the dentist and his acceptance of her offer.
As a result, the court allowed the appeal and concluded that the ESA minimum notice was the maximum amount to which the employee was entitled, measured from 2005. On this basis, she was entitled to 7.5 weeks of salary minus the one week already paid.
The Kitchener-Waterloo employment lawyers at Petker Campbell Postnikoff have many years of experience advising non-unionized employees and employers on a variety of workplace issues, including harassment and termination. Our team will walk you through the details of your dispute, advise you on your rights, responsibilities and obligations, and help you understand your options. If your dispute cannot be settled through negotiation, we can represent you through mediation and the court process.
We represent clients throughout southern Ontario, including the communities of Cambridge, Guelph, Elmira, Brantford, Fergus, Elora and the surrounding area. Call 519-886-1204 or contact us online for a consultation.