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You be the judge: Is this dismissal or resignation?

Read the facts of this hypothetical situation and render your judgment

By Stuart Rudner

This blog post arises out of a discussion that took place over the lunch break at the Employment Law 2011 Conference in Toronto, which I chaired for Osgoode Professional Development.

The hypothetical situation we discussed was something along these lines:

An employer plans a reorganization and calls one of its employees to say his position is likely to be eliminated, although no definite decision has been made yet. When the employee asks what his options would be in order to remain with the company, he is advised they have not identified any other positions for which he would be suitable.

The employee then asks what the other options are, and raises the idea of a severance package. In response, the employer asks what he would be looking for, and invites him to take a few days to think about it. The employee stays home for a few days, meets with his lawyer and delivers his proposal, which is far richer than what the employer had in mind. However, the parties engage in good faith negotiations in order to agree on a severance package. During this time, the individual remains at home, off work. Ultimately, it becomes clear the parties are not going to be able to reach a resolution.

At that point, the employee’s lawyer writes to the company, sets out his understanding of the background facts and concludes by saying this was a dismissal without cause and his client is entitled to “X” months of notice. The employer, through counsel, responds by stating they never dismissed the employee. Rather, they take the position it was the employee that raised the possibility of terminating the employment relationship, and he therefore effectively resigned.

The issue, then, is whether this situation should be treated as a dismissal or a resignation. Canadian courts have been clear in saying resignations must be clear and unequivocal. I would suggest this case is anything but. That said, the employer’s position will be it was the employee that prompted the termination of the relationship, and that it did not dismiss him.

This situation might be easier to assess if the individual had continued to work during the negotiations. If that were the case, at some point the employer would presumably have had to take overt action to terminate the employment relationship. At that point, it would be clear there had been a dismissal. However, in this case, the parties seem to have agreed upon a mutual termination of the employment relationship. So is the company obligated to offer pay in lieu of notice of dismissal?

I welcome comments as to how this matter should be treated by the courts.

Stuart Rudner is a partner with Miller Thomson LLP in Ontario, specializing in employment law. He provides clients with strategic advice regarding all aspects of the employment relationship, and represents them before courts, mediators and tribunals. He is author of You’re Fired: Just Cause for Dismissal in Canada, published by Carswell. He can be reached at (905) 415-6767 or srudner@millerthomson.com. You can also follow him on Twitter @CanadianHRLaw, join his Canadian Employment Law Group on LinkedIn, and connect with him on Google+.

Stuart Rudner

Stuart Rudner, Employment Lawyer and MediatorStuart Rudner is the founder of Rudner Law (RudnerLaw.ca), a firm specializing in Employment Law and Mediation. He can be reached at stuart@rudnerlaw.ca, (416) 864-8500 or (905) 209-6999, and you can follow on Twitter @RudnerLaw.
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  • Good question
    Wednesday, January 11, 2012 8:51:00 AM by Stuart Rudner
    Thanks for your insight Kellie. While the scenario is not based on a true story, I have certainly seen similar situations where an employer allows an employee to stay home, assuming or expecting that they can reach an agreement to part ways amicably. When that does not happen, the parties can end up in the type of ambiguous situation we see here.
  • Interesting
    Monday, January 9, 2012 3:56:00 PM by Stuart Rudner
    Interesting to see that there is no consensus. Confirms my decision to post this :)