Severance pay for a long-term employee who left and came back

Brian Johnston
Question: I have a question regarding termination pay and severance pay. (Company has more than 50 employees and more than $2.5 million payroll.) If an employee worked for more than five years for a company, then resigned but returned two years later, to take a management position for more than five years with the company, what kind of termination and severance pay is required. (There is no malicious or willful negative behaviour and the employee is 40 to 45 years old.)

Answer: You must consult your local employment legislation. By way of example, in Nova Scotia successive periods of employment will be counted as one period of employment where the periods of employment between termination are less than 13 weeks apart, or where an employee has been laid off or suspended for less than 12 months.

Therefore, where there is a clear break in employment of two years, as in this case, only the most recent period of employment will be counted in determining the employee’s statutory notice entitlement. Thus, although the employee may have worked for a combined period of 10 years or more, her notice entitlement is restricted to her latter period of employment and she is not entitled to any reinstatement protection offered through s. 71 of the Labour Standards Code. The employer’s statutory liability is limited to the four weeks’ notice that she is entitled to under subs. 72.

At common law, where there is no express term in the re-employment arrangement dealing with the issue, the question becomes whether the employer has otherwise recognized continuity of service or provided the employee with a service credit on re-hiring. Courts will consider whether the parties have effectively ignored the break in service or whether they have agreed to treat the two periods separately.

For example, in Chorny v. Freightliner of Canada Ltd., after 14-years’ service and having attained the position of regional manager, the plaintiff took employment with a competitor for two years. After this period he was rehired and employed by the defendant for a further 12 years before being dismissed without cause. On rehiring the employer treated the plaintiff as a long-term employee, disregarding his two year hiatus for such purposes as pension entitlement and service recognition awards. The court concluded the plaintiff’s “short-term” absence ought to be ignored with the result that he was treated as a 28-year employee.

Applying the usual reasonable notice factors for this type of employee (management, relatively young age, with no employer behaviour attracting Wallace damages), the notice period is up to six months.

If there is recognition of continuity of service, her entitlement increases to about 10 months’ notice. This estimate is, however, subject to the presence of other factors that might tend to increase notice entitlement in the particular circumstances such as opportunities for other employment and circumstances under which the employment arose.

For more information see:

Chorny v. Freightliner of Canada Ltd., 1995 CarswellBC 41, 9 C.C.E.L. (2d) 11 (B.C. S.C.)

Brian Johnston is a partner with Stewart McKelvey Stirling Scales in Halifax. He can be reached at (902) 420-3374 or [email protected].

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