The Ongoing Impact of a Revoked Resignation
A broken engagement had some unfortunate unforeseen consequences to a woman who was wrongfully dismissed, seven years later.
Ms. Theberge-Lindsay was employed on a continuous basis in the dental office in Stoney Plain, Ontario, as a dental hygienist, from 1993 to 2012, before she was dismissed without cause.
In or about 1999, the employer restructured and had her sign an employment agreement with a management services corporation. She received nothing but continued employment for that signature, and there was no change to her duties.
In March 2005, she provided the employer a notice of resignation, effective July 5, 2005, because she had become engaged and intended to relocate to Guelph, where she had obtained replacement employment. In May, the engagement ended, and she advised her boss that she intended to stay.
The only statement in either decision about the employer's response to that was that the Plaintiff testified that he "was pleased to hear it as he did not want her to leave."
In late June 2005, she executed another contract, commencing July 1, 2005, and limiting her entitlements on termination to the Employment Standards Act, 2000 minimums.
In 2011, the existing operating company wound up and terminated her employment, and she was hired directly by the dentist's Professional Corporation with a new written contract. Again, no change to her duties.
Then, at the end of 2012, she was dismissed without notice.
The employer took the position that the applicable contract of employment ran from 2011 to 2012, and limited her entitlements to her ESA claim (1 week). She sued in wrongful dismissal.
Justice Chiapatta concluded that the various contracts that she had signed over the years were void for lack of consideration. They came with no additional remuneration and no change to her job duties. As such, the employer could not rely on the termination clauses in those contracts.
Furthermore, despite nominal changes in the corporate entity employing her, that did nothing to change the fact that she was a 19 year employee with one continuous business. (This is well-grounded, both in a statutory analysis and a common law analysis.)
She was awarded a 15 month notice period - around $70,000.
The Ontario Court of Appeal disagreed with the trial judge in one key respect: The resignation in 2005 "broke the chain" of continuous employment - and therefore the contract put to her in June 2005 created a new contract of employment. As such, she was awarded 7.5 weeks' pay in lieu of notice, less amounts already paid.
I have a few observations about the analysis.
(1) Fresh Consideration
The fundamental components of a contract are Offer, Acceptance, and Consideration. Without any one of the three, a contract doesn't exist - so an offer and acceptance, without consideration, is not enforceable. The term "consideration", at law, essentially means 'something flowing from each party to the contract'. Consideration doesn't need to be particularly valuable; it doesn't need to be a fair exchange; but there needs to be something.
In an employment contract, the 'consideration' is that the employer offers the job, and the remuneration for the job, and the employee in exchange offers services.
There's a long line of case law, in Ontario and elsewhere, concluding that, once an employee has the job, continued employment (on its own) doesn't constitute consideration. Justice Chiapatta's decision briefly reviews some of this case law, and I won't expand on that. (I will note that Alberta has followed this line of case law, if not so enthusiastically. The majority of the Alberta Court of Appeal, in Globex Foreign Exchange Corporation v. Kelcher, the majority followed the Ontario case law, but Justice Slatter dissented.)
It is possible to bind an existing employee to new terms and conditions of employment...but the employer has to give something new in exchange. Signing the agreement can be a pre-requisite to a promotion, a raise, a bonus, or some other benefit. Even a nominal signing bonus can be enough.
There's little doubt that the contract signed in 1999 lacked fresh consideration. From the facts described, it's a classic case of 'no fresh consideration'. The 2005 contract...is a bit more complicated, and I'll come back to that below.
The 2011 contract, on the facts described, is less clear. It appears to me that there was actually a notice of termination of the employment relationship with the management services company, and that - if she had refused to sign - her employment relationship would have come to an end at the end of 2011. This framework would operate somewhat outside of the usual 'fresh consideration' framework, where the employer comes to court saying, "Well, I would have terminated her if she didn't sign the contract", in that this case appears to have a framework where the contract was terminated, perhaps independently of her election to sign the new contract. On a principled basis, this should probably have an impact on the 'fresh consideration' analysis.
(2) Common and Successor Employers
Over the course of her employment, the plaintiff worked in the same office, doing essentially the same work, reporting to the same dentist who signed all her pay cheques...and yet, technically, those pay cheques were offered by three different legal persons: The dentist personally (until 1999); the management services corporation (from 1999 to 2011); and the professional corporation (in 2012).
Yet these changes in the identity of the employer did not interrupt her tenure. This would presumably be a result of one of two doctrines, though neither is mentioned in either decision: The 'common employer' doctrine, or the 'successor employer' doctrine.
The 'common employer' doctrine evolved around complex corporate structures: Where one business is operated by a series of holding and operating companies, there is no reason why the responsibilities of the 'employer' in the relationship should be arbitrarily restricted to the corporation paying the payroll. One could easily characterize the relationships between the various employers in this case as being that of 'common employers', throughout the existence of the various corporate entities.
The 'successor employer' doctrine deals with scenarios where one employer acquires business operations of another employer, and hires the employees along with it.
Technically, there are two different principles underlying different facets of the 'successor employer' doctrine. The first is statutory 'deemed continuity' provisions (in Ontario, s.9 of the ESA), which expressly deems employment continuous through such changes in control, for purposes of calculating "period of employment" under the ESA. The second is an implied term at common law that a successor employer, unless expressly advising the otherwise at the point of hire, is deemed to respect the employee's previous period of service for all relevant purposes. (This one's a little more obscure, and relatively unknown even among many employment lawyers. It's well-grounded in the case law, however. See, for instance, the Sorel case.)
I could certainly characterize these employers as 'successor employers' quite easily, as well - or, at minimum, the transfer from the management services company to the professional corporation would certainly be a successorship, with the professional corporation acquiring part or all of the business of the management services company.
The employer tried to argue that the dentist's wife was the directing mind of the management services company, and this is why the terminated employment contract was under a year, and they argued they should only be required to pay 1 week pay in lieu of notice. Quite frankly, I find it surprising that an employer would take that position up to trial at all, much less to the Court of Appeal. It is an offence under the ESA to hold back statutory minimum payments, and - while not drawn out in these decisions - courts typically frown upon an employer playing this kind of hardball, holding back statutory minimums on the basis of very tenuous legal posturing.
(3) Nitpicking at the Quantum
Here's a relatively trivial point: The Court of Appeal's quantum is wrong. Under Ontario's ESA, entitlements to statutory severance pay (which was presumably not applicable in this scenario) can accrue in partial years, but not statutory notice. Stat notice, for an employee with between 7 and 8 years of service, is 7 weeks. Not 7.5. This isn't a critical issue of principle, but it raises questions about the closeness of the reading given to the ESA by the Court of Appeal, in reasons that were otherwise relatively cursory.
(4) Important Changes to the Interpretation of the ESA
The implied interpretation of the ESA - which, again, was cursory - is significant. The phrase "period of employment" is an important one in the ESA: It defines termination entitlements, which can be anywhere from 0 to 34 weeks, and is what workers will colloquially (in non-union contexts) call 'seniority'. In part because of s.9, courts have traditionally taken a fairly expansive view of "period of employment", accounting for all continuous employment, and not broken even by changes in control, leaves of absence, or temporary layoffs.
The Court's conclusion here suggests an accepted resignation marks an end to the "period of employment", even for ESA purposes, and that continuing the employment relationship afterward, even on an uninterrupted basis, will start a fresh clock.
This is, perhaps, the most important takeaway for employees in non-union environment: If you submit a letter of resignation, you may be forfeiting any 'seniority', even if you don't end up leaving.
But there are deeper practical consequences. The expansive view of "period of employment" is part of a broader sense of interpretation of employment standards, as remedial legislation to protect employees. As an employment lawyer, I have seen plenty of different structures designed to try to limit an employee's entitlements - take, for instance, the 'series of fixed term contract' scenario, where an employee works 20 consecutive 1-year contracts.
The general assumption has been that this framework can't get an employer out of treating the employee as a 20-year employee, at least for statutory purposes, in part because that would defeat the point of the statutory protection. This assumption may no longer be safe.
(5) What's a Retraction?
The legal question of whether or not an employee can 'take back' a resignation at all has long been an interesting one: The Courts have tended to be willing to forgive a frustrated shout of "I quit", if the employee promptly rethought it and returned to work. But there's a line to be drawn somewhere, at which point an employer can assert that the resignation is 'binding'. Some case law suggests that mere acceptance of the resignation is enough to bind the employee to it; other case law suggests that 'reliance' is necessary (such as filling or attempting to fill the vacancy).
In either case, there's no question here that the employer in this scenario was entitled to refuse the retraction of her resignation, or to impose terms on it.
But the trial judge found as fact that he accepted the retraction of her resignation. This is a finding that is owed significant deference.
So what is the legal impact of the acceptance of a retraction of a resignation, prior to the effective date of the resignation?
Is the resignation still effective to terminate the contract, and the offer and acceptance creates a new contract of employment, on new terms and conditions? (Does it matter if, as here, a new written employment agreement is entered into with an effective date prior to the termination date in the resignation?)
It strikes me that this interpretation is tenuous, not in keeping with the reasonable expectations of parties to employment contracts, and would have far-reaching consequences. If I proffer my resignation, my employer accepts it, and then I ask to be able to stay instead, and the employer agrees, the reasonable expectation - by default - would be that I am continuing on the same terms and conditions as before. This would be true whether or not I have signed a prior written contract, or a fixed term contract; my services would reasonably be regarded as continuing under that original contract, and it would be unreasonable (and deeply surprising to most commercially reasonable people) to expect my employer to have to 're-paper' the deal on the basis that my submission of a resignation letter scuttled the old contract in such a way that it couldn't even be saved by agreement of the parties.
Quite the contrary, if I submit a resignation letter, which is accepted, then I ask to revoke the resignation letter, the traditional imagery that we would apply - be it literal or figurative - is that the employer is able to then 'tear up' the resignation letter, symbolizing an understanding that the relationship continues as if the resignation letter was never submitted.
Unless the parties agree otherwise - which brings me to the final point.
(6) Standard of Review
Finally, the question of consideration for the 2005 contract was fundamentally a question of fact.
Even if one assumes that the resignation had the effect of irrevocably terminating the employment relationship, and that the accepted revocation of the resignation had the effect of creating a new employment relationship...the sequence of events for restoring the relationship matters here: The evidence suggests that the plaintiff indicated her intention to revoke her resignation at some point in May 2005, and that the defendant expressly or impliedly indicated his acceptance of that revocation - presumably immediately or shortly thereafter.
While, as acknowledged above, there's little question that he would have been entitled to impose 'terms' on the acceptance of the revocation, that entitlement dissolves after he actually accepts the revocation. Once you already have an employment contract in place, you cannot bind the employee to new or different terms without offering 'fresh consideration'; as such, once you have agreed to rescind the resignation, the employment contract (whether it's the old one or a new one) exists, and can't be modified without consideration.
It would be analogous to a scenario where an employee offers a position, the employee accepts it, and then the employer puts a contract in front of the employee at or near the start date. (See, for example, Alishahh v. 1582557 Ontario Ltd.)
With the greatest respect, I would suggest that the Ontario Court of Appeal got this one wrong. The idea that an accepted resignation automatically severs the employment relationship, even if mutually rescinded prior to its effective date, is deeply questionable as a legal principle; moreover, that distinction isn't relevant to the factual question of consideration. Whether you regard 'acceptance of the revocation' as creating a new contract, or continuing the old one, there doesn't appear to be any question that the employer would be entitled to tie new terms and conditions to that acceptance...and the trial judge found as fact that the employer did not do so.
And by undermining the long-standing ubiquitous view that "continuity" of employment is the high watermark for establishing length of service under employment standards legislation and at common law, this decision will herald a new era of uncertainty in certain classes of cases.
*****
Dennis Buchanan is a lawyer practicing labour and employment law and civil litigation in Edmonton, Alberta.
This post does not contain legal advice, but only general legal information. It does not create a solicitor-client relationship with any readers. If you have a legal issue or potential issue, please consult a lawyer.
The Facts
Ms. Theberge-Lindsay was employed on a continuous basis in the dental office in Stoney Plain, Ontario, as a dental hygienist, from 1993 to 2012, before she was dismissed without cause.
In or about 1999, the employer restructured and had her sign an employment agreement with a management services corporation. She received nothing but continued employment for that signature, and there was no change to her duties.
In March 2005, she provided the employer a notice of resignation, effective July 5, 2005, because she had become engaged and intended to relocate to Guelph, where she had obtained replacement employment. In May, the engagement ended, and she advised her boss that she intended to stay.
The only statement in either decision about the employer's response to that was that the Plaintiff testified that he "was pleased to hear it as he did not want her to leave."
In late June 2005, she executed another contract, commencing July 1, 2005, and limiting her entitlements on termination to the Employment Standards Act, 2000 minimums.
In 2011, the existing operating company wound up and terminated her employment, and she was hired directly by the dentist's Professional Corporation with a new written contract. Again, no change to her duties.
Then, at the end of 2012, she was dismissed without notice.
The employer took the position that the applicable contract of employment ran from 2011 to 2012, and limited her entitlements to her ESA claim (1 week). She sued in wrongful dismissal.
The Trial Decision
Justice Chiapatta concluded that the various contracts that she had signed over the years were void for lack of consideration. They came with no additional remuneration and no change to her job duties. As such, the employer could not rely on the termination clauses in those contracts.
Furthermore, despite nominal changes in the corporate entity employing her, that did nothing to change the fact that she was a 19 year employee with one continuous business. (This is well-grounded, both in a statutory analysis and a common law analysis.)
She was awarded a 15 month notice period - around $70,000.
The Appeal
The Ontario Court of Appeal disagreed with the trial judge in one key respect: The resignation in 2005 "broke the chain" of continuous employment - and therefore the contract put to her in June 2005 created a new contract of employment. As such, she was awarded 7.5 weeks' pay in lieu of notice, less amounts already paid.
Commentary
I have a few observations about the analysis.
(1) Fresh Consideration
The fundamental components of a contract are Offer, Acceptance, and Consideration. Without any one of the three, a contract doesn't exist - so an offer and acceptance, without consideration, is not enforceable. The term "consideration", at law, essentially means 'something flowing from each party to the contract'. Consideration doesn't need to be particularly valuable; it doesn't need to be a fair exchange; but there needs to be something.
In an employment contract, the 'consideration' is that the employer offers the job, and the remuneration for the job, and the employee in exchange offers services.
There's a long line of case law, in Ontario and elsewhere, concluding that, once an employee has the job, continued employment (on its own) doesn't constitute consideration. Justice Chiapatta's decision briefly reviews some of this case law, and I won't expand on that. (I will note that Alberta has followed this line of case law, if not so enthusiastically. The majority of the Alberta Court of Appeal, in Globex Foreign Exchange Corporation v. Kelcher, the majority followed the Ontario case law, but Justice Slatter dissented.)
It is possible to bind an existing employee to new terms and conditions of employment...but the employer has to give something new in exchange. Signing the agreement can be a pre-requisite to a promotion, a raise, a bonus, or some other benefit. Even a nominal signing bonus can be enough.
There's little doubt that the contract signed in 1999 lacked fresh consideration. From the facts described, it's a classic case of 'no fresh consideration'. The 2005 contract...is a bit more complicated, and I'll come back to that below.
The 2011 contract, on the facts described, is less clear. It appears to me that there was actually a notice of termination of the employment relationship with the management services company, and that - if she had refused to sign - her employment relationship would have come to an end at the end of 2011. This framework would operate somewhat outside of the usual 'fresh consideration' framework, where the employer comes to court saying, "Well, I would have terminated her if she didn't sign the contract", in that this case appears to have a framework where the contract was terminated, perhaps independently of her election to sign the new contract. On a principled basis, this should probably have an impact on the 'fresh consideration' analysis.
(2) Common and Successor Employers
Over the course of her employment, the plaintiff worked in the same office, doing essentially the same work, reporting to the same dentist who signed all her pay cheques...and yet, technically, those pay cheques were offered by three different legal persons: The dentist personally (until 1999); the management services corporation (from 1999 to 2011); and the professional corporation (in 2012).
Yet these changes in the identity of the employer did not interrupt her tenure. This would presumably be a result of one of two doctrines, though neither is mentioned in either decision: The 'common employer' doctrine, or the 'successor employer' doctrine.
The 'common employer' doctrine evolved around complex corporate structures: Where one business is operated by a series of holding and operating companies, there is no reason why the responsibilities of the 'employer' in the relationship should be arbitrarily restricted to the corporation paying the payroll. One could easily characterize the relationships between the various employers in this case as being that of 'common employers', throughout the existence of the various corporate entities.
The 'successor employer' doctrine deals with scenarios where one employer acquires business operations of another employer, and hires the employees along with it.
Technically, there are two different principles underlying different facets of the 'successor employer' doctrine. The first is statutory 'deemed continuity' provisions (in Ontario, s.9 of the ESA), which expressly deems employment continuous through such changes in control, for purposes of calculating "period of employment" under the ESA. The second is an implied term at common law that a successor employer, unless expressly advising the otherwise at the point of hire, is deemed to respect the employee's previous period of service for all relevant purposes. (This one's a little more obscure, and relatively unknown even among many employment lawyers. It's well-grounded in the case law, however. See, for instance, the Sorel case.)
I could certainly characterize these employers as 'successor employers' quite easily, as well - or, at minimum, the transfer from the management services company to the professional corporation would certainly be a successorship, with the professional corporation acquiring part or all of the business of the management services company.
The employer tried to argue that the dentist's wife was the directing mind of the management services company, and this is why the terminated employment contract was under a year, and they argued they should only be required to pay 1 week pay in lieu of notice. Quite frankly, I find it surprising that an employer would take that position up to trial at all, much less to the Court of Appeal. It is an offence under the ESA to hold back statutory minimum payments, and - while not drawn out in these decisions - courts typically frown upon an employer playing this kind of hardball, holding back statutory minimums on the basis of very tenuous legal posturing.
(3) Nitpicking at the Quantum
Here's a relatively trivial point: The Court of Appeal's quantum is wrong. Under Ontario's ESA, entitlements to statutory severance pay (which was presumably not applicable in this scenario) can accrue in partial years, but not statutory notice. Stat notice, for an employee with between 7 and 8 years of service, is 7 weeks. Not 7.5. This isn't a critical issue of principle, but it raises questions about the closeness of the reading given to the ESA by the Court of Appeal, in reasons that were otherwise relatively cursory.
(4) Important Changes to the Interpretation of the ESA
The implied interpretation of the ESA - which, again, was cursory - is significant. The phrase "period of employment" is an important one in the ESA: It defines termination entitlements, which can be anywhere from 0 to 34 weeks, and is what workers will colloquially (in non-union contexts) call 'seniority'. In part because of s.9, courts have traditionally taken a fairly expansive view of "period of employment", accounting for all continuous employment, and not broken even by changes in control, leaves of absence, or temporary layoffs.
The Court's conclusion here suggests an accepted resignation marks an end to the "period of employment", even for ESA purposes, and that continuing the employment relationship afterward, even on an uninterrupted basis, will start a fresh clock.
This is, perhaps, the most important takeaway for employees in non-union environment: If you submit a letter of resignation, you may be forfeiting any 'seniority', even if you don't end up leaving.
But there are deeper practical consequences. The expansive view of "period of employment" is part of a broader sense of interpretation of employment standards, as remedial legislation to protect employees. As an employment lawyer, I have seen plenty of different structures designed to try to limit an employee's entitlements - take, for instance, the 'series of fixed term contract' scenario, where an employee works 20 consecutive 1-year contracts.
The general assumption has been that this framework can't get an employer out of treating the employee as a 20-year employee, at least for statutory purposes, in part because that would defeat the point of the statutory protection. This assumption may no longer be safe.
(5) What's a Retraction?
The legal question of whether or not an employee can 'take back' a resignation at all has long been an interesting one: The Courts have tended to be willing to forgive a frustrated shout of "I quit", if the employee promptly rethought it and returned to work. But there's a line to be drawn somewhere, at which point an employer can assert that the resignation is 'binding'. Some case law suggests that mere acceptance of the resignation is enough to bind the employee to it; other case law suggests that 'reliance' is necessary (such as filling or attempting to fill the vacancy).
In either case, there's no question here that the employer in this scenario was entitled to refuse the retraction of her resignation, or to impose terms on it.
But the trial judge found as fact that he accepted the retraction of her resignation. This is a finding that is owed significant deference.
So what is the legal impact of the acceptance of a retraction of a resignation, prior to the effective date of the resignation?
Is the resignation still effective to terminate the contract, and the offer and acceptance creates a new contract of employment, on new terms and conditions? (Does it matter if, as here, a new written employment agreement is entered into with an effective date prior to the termination date in the resignation?)
It strikes me that this interpretation is tenuous, not in keeping with the reasonable expectations of parties to employment contracts, and would have far-reaching consequences. If I proffer my resignation, my employer accepts it, and then I ask to be able to stay instead, and the employer agrees, the reasonable expectation - by default - would be that I am continuing on the same terms and conditions as before. This would be true whether or not I have signed a prior written contract, or a fixed term contract; my services would reasonably be regarded as continuing under that original contract, and it would be unreasonable (and deeply surprising to most commercially reasonable people) to expect my employer to have to 're-paper' the deal on the basis that my submission of a resignation letter scuttled the old contract in such a way that it couldn't even be saved by agreement of the parties.
Quite the contrary, if I submit a resignation letter, which is accepted, then I ask to revoke the resignation letter, the traditional imagery that we would apply - be it literal or figurative - is that the employer is able to then 'tear up' the resignation letter, symbolizing an understanding that the relationship continues as if the resignation letter was never submitted.
Unless the parties agree otherwise - which brings me to the final point.
(6) Standard of Review
Finally, the question of consideration for the 2005 contract was fundamentally a question of fact.
Even if one assumes that the resignation had the effect of irrevocably terminating the employment relationship, and that the accepted revocation of the resignation had the effect of creating a new employment relationship...the sequence of events for restoring the relationship matters here: The evidence suggests that the plaintiff indicated her intention to revoke her resignation at some point in May 2005, and that the defendant expressly or impliedly indicated his acceptance of that revocation - presumably immediately or shortly thereafter.
While, as acknowledged above, there's little question that he would have been entitled to impose 'terms' on the acceptance of the revocation, that entitlement dissolves after he actually accepts the revocation. Once you already have an employment contract in place, you cannot bind the employee to new or different terms without offering 'fresh consideration'; as such, once you have agreed to rescind the resignation, the employment contract (whether it's the old one or a new one) exists, and can't be modified without consideration.
It would be analogous to a scenario where an employee offers a position, the employee accepts it, and then the employer puts a contract in front of the employee at or near the start date. (See, for example, Alishahh v. 1582557 Ontario Ltd.)
Summary
With the greatest respect, I would suggest that the Ontario Court of Appeal got this one wrong. The idea that an accepted resignation automatically severs the employment relationship, even if mutually rescinded prior to its effective date, is deeply questionable as a legal principle; moreover, that distinction isn't relevant to the factual question of consideration. Whether you regard 'acceptance of the revocation' as creating a new contract, or continuing the old one, there doesn't appear to be any question that the employer would be entitled to tie new terms and conditions to that acceptance...and the trial judge found as fact that the employer did not do so.
And by undermining the long-standing ubiquitous view that "continuity" of employment is the high watermark for establishing length of service under employment standards legislation and at common law, this decision will herald a new era of uncertainty in certain classes of cases.
*****
Dennis Buchanan is a lawyer practicing labour and employment law and civil litigation in Edmonton, Alberta.
This post does not contain legal advice, but only general legal information. It does not create a solicitor-client relationship with any readers. If you have a legal issue or potential issue, please consult a lawyer.
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