Thursday, September 20, 2012

Where Working Notice Fails

Thanks go to Professor Doorey for posting about this case, Dechene v. Dr. Khurrum Ashraf Dentistry, recently released by the Divisional Court, involving an employee who received the statutory minimum working notice and immediately left, then sued for wrongful dismissal.  Deputy Judge Winny allowed the claim, and the decision was upheld at the Divisional Court.

The Facts

Ms. Dechene was a dental hygienist, working part-time, up to 32 hours per week.  The employer had a human resources consultant who put a new non-negotiable contract to her which would require the employee to recognize the employer's "absolute right" to require her to work up to 48 hours per week.  She refused to sign the contract, despite the consultant saying that if she didn't sign, he would advise the employer to fire her.  She felt that the employer valued her contribution, and would make his own decision.

The next morning, the employer delivered a termination letter, providing five weeks of working notice.  The employee was distraught, and unable to continue with her duties, and went home immediately.  She called the next day to offer to work through the five weeks, but the employer had already replaced her.

The Issues

(1)  Deputy Judge Winny found that the non-negotiable contract constituted a constructive dismissal.

(2)  In the alternative, he concluded that dismissal on only five weeks' notice was a breach of contract, constituting wrongful dismissal.  He found that she was entitled, at common law, to pay in lieu of six months' notice.

(3)  He also rejected the contention by the employer that, by leaving work, she had repudiated the employment contract herself.

The employer appealed, arguing that there was no constructive dismissal, and that her failure to work the five weeks of actual notice was a repudiation of the contract disentitling her to reasonable notice, or alternatively that her entitlements should be reduced by the five weeks, on what the employer argued should be only a four month notice period.

The Divisional Court's Findings

The employer succeeded on the 'constructive dismissal' point, but lost on the rest, so ultimately lost the appeal in all material aspects.

In my humble opinion, the Divisional Court got this one exactly right.  Or so close as makes no difference.

The Framework

Constructive Dismissal

Let's start with the "constructive dismissal" argument.  A constructive dismissal is a unilateral change by the employer to a fundamental term of employment.  If the employer had unilaterally said, "From now on, you're working up to 48 hours per week", that would have been a constructive dismissal.

But the employer didn't do that.  Instead, the employer proposed a new term.  The employee rejected it.  So the terms of employment are unchanged, no unilateral change has been imposed, and no constructive dismissal has occurred.

Wrongful Dismissal

An employment contract, at common law, contains an implied obligation upon the employer to terminate only on "reasonable notice".  On the facts, it is evident that five weeks does not constitute "reasonable notice", and therefore delivery of a five week notice constitutes a breach of contract.  That gives her the right to sue for damages occasioned by the breach of contract - which would, at face value, be the time frame from the end of the actual notice period to the end of the reasonable notice period.  That is where the employer's alternative argument (that the notice period should be reduced by five weeks) originates.

The Employee's "Resignation"

The Divisional Court dealt with this in a relatively summary manner, and largely looked at whether or not the employer's conduct was 'reasonable' in the circumstances.  Though the question isn't really framed in terms of resignation, it seems to me that, if it isn't actually a resignation issue, it is something indistinguishably similar.  There is a lot of jurisprudence on resignation - what makes a resignation effective, when it can be rescinded, etc. - but the Divisional Court here simply said that her departure "did not exemplify an intention on her part to repudiate the employment relationship."

On the facts, largely for reasons I'll touch on below, this is an eminently reasonable conclusion, and under the well-established jurisprudence on resignations means that she cannot be taken to have resigned.

The Divisional Court felt that the employer acted 'precipitously' by so quickly moving to replace her.  I might argue that this is too mild a characterization, and I might argue that the failure to permit her to come into work the next day constituted a further wrongful dismissal (which is how I would get to the conclusion that she is entitled to pay in lieu of the full notice period).

The Reasonable Notice Period

The Deputy Judge's conclusion that she was entitled to six months seems to me, off the top of my head, to be quite appropriate.  Appellate Courts tend to give deference on that question, unless there is an error in principle, and dislike fine tuning which amounts to "unwarranted tinkering".

Lessons Learned

This case absolutely does *not* stand for the proposition that, if an employee gets a working notice of termination which falls short of his or her common law or contractual entitlements, that employee can immediately go home and sue for the whole notice period.

What it means is that employers have to approach these matters with some caution.

To some extent, I find this decision vindicating.  In these difficult economic times, I have had several employer clients who wanted to dismiss a long-service employee for business reasons, but could not afford the onerous requirements of 'pay in lieu of reasonable notice', in the sense of paying an employee for work not being performed.  Thus, increasingly, I have been asked to assist in dismissals of employees on provision of working notice.

My advice to employers in such scenarios, while varying based on the specific circumstances, always entails a bit of a soft touch, including the recognition that receiving a notice of termination can be very stressful.  I have advised employers to provide the notice at the end of the day, or alternatively to offer the employee the rest of the shift off, with pay, on the clear understanding of "See you tomorrow".

Working notice is in some ways different from dismissals without notice - you don't need to worry about the employee collecting their belongings, or cutting off their remote network access, or securing their company property - but in some ways the obligations are just as onerous or moreso compared to a dismissal without notice.  The stress reaction still may exist, and needs to be managed even more carefully, because the employment relationship still needs to be maintained, and if the employer takes actions which make that impossible, liabilities may be incurred.  So ensuring the availability of EAPs, taxi chits, etc., are still important.

HR Consultants versus Employment Lawyers

The case is also a cautionary tale on relying too heavily on HR Consultants.  They can be very helpful, within the limits of their expertise, but it is not unusual to find an HR Consultant who misapprehends the ESA or who does not understand common law obligations, or the finer nuances of employment law.  When it comes to hiring and firing, there is simply no replacement for a competent lawyer.  That can result in significant liabilities.

This case is a perfect example of the "a stitch in time" approach to legal services.

Consider this:  If the employer had hired an employment lawyer prior to the termination, the lawyer would have told the employer (a) that 5 weeks is insufficient, and that actual obligations will be more in the area of 4-6 months; (b) that working notice can be provided for the whole common law notice period, but a good assessment of that notice period is essential up front, and (c) that if the employee quits in response, that measures should be taken to ensure that the resignation can be relied upon before actually taking steps in reliance.  That would likely come at a cost in the low four-digits, depending on the lawyer.

Then it would have been open to the employer to simply offer her six months actual notice, and keep her working through the time for which she had to be paid.  Instead of having to pay for legal fees associated with (a) a Small Claims Court trial and (b) a Divisional Court appeal, plus $25,000 in wages through the entire notice period during which it was paying somebody else to do her job, and contributions to the employee's legal fees.

There's no question that the employer's legal fees would be into the five digit range (exactly how far, I'm not going to guess), and the contribution to the employee's legal fees could conceivable be into the five digit range as well.


This blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.

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