As with most decisions in business, the adage "timing is everything" holds true when employers decide to dismiss their employees. The importance of timing was recently illustrated when a British Columbia employer eliminated an employee's position, and ceased operation, while she was away on maternity leave.
In Lewis v. Terrace Tourism Society,  B.C.J. No. 1357, the British Columbia Court of Appeal reviewed whether it is necessary to provide an employee on leave with actual notice that her employment is terminated during the leave period, and before her scheduled return to work. The decision illustrates that an employee's legal rights at termination are not suspended or varied while on leave.
The case involved the termination of Jennifer Lewis, the executive director of the Terrace Tourism Society, while she was on maternity leave. During her leave, the society found itself in "dire financial straits"; as a result of the City of Terrace discontinuing its funding for the office. Shortly after, the society dismissed the interim executive director and commenced the dissolution process under the society's constitution.
At a meeting also attended by Lewis, the society passed a resolution to close its office, cease its operations and terminate the executive director position. It was abundantly clear that Lewis' job no longer existed.
In the weeks that followed, the society investigated its severance obligation to Lewis; however, Lewis was unable to confirm that any severance would be provided by the society. Lewis had received no notice of her termination, and was concerned that the society was attempting to divest itself of its assets in order to avoid its obligation to her. As a result, she commenced an action in small claims court for constructive dismissal. The society responded by terminating Lewis' employment for cause.
Lewis then filed an action in the Supreme Court of British Columbia, claiming wrongful dismissal. The society successfully moved for summary judgment dismissing the claim. The summary trial judge found that Lewis was not constructively dismissed, and that her lawsuit effectively repudiated her employment contract and provided the society with just cause for her termination.
On appeal, however, the court found that Lewis’ employment ended, at the latest, when the society resolved to end its operation and terminate her position. Lewis knew of these actions, and it was irrelevant that she was away from the workplace on leave at the time. If Lewis had not been away on maternity leave, she would have been entitled to notice of her termination at that time. Further, her employment contract was not "kept alive" by the society's intention to offer severance at an unspecified time in the future. Since the society failed to properly provide notice of her termination, Lewis was entitled to pursue constructive dismissal.
The court affirmed that the legal rights of an employee on leave are neither suspended nor varied. Employees on leave are not subject to a different application of the law. A termination is therefore effective where there is no reasonable doubt in the mind of the employee that employment is at an end, regardless of whether the employee is in the workplace. He or she is entitled to receive legal notice of termination, or pay in lieu, at that time.
The court also reviewed the timing of Lewis' small claims court action, and although not ruling on the issue, found that she was within her rights to sue her former employer prior to receiving formal notice of her termination. Where every indication suggests that employment is at an end, and reasonable notice has not been given, an employee is entitled to sue in court to determine her rights. Doing so is not a repudiation of the employment contract.
The decision clarifies that employees are not held in limbo during a period of leave. During the course of their leave, employees must be treated the same as employees at work in the manner of their dismissal. Employees' vulnerability during leave periods, particularly those on unpaid leave of absence, cannot be exploited. An employee's right to notice of termination is not in any way altered while on leave, and employers who delay in providing proper notice may instead end up defending a constructive dismissal claim. Employers therefore should not attempt to postpone or avoid their obligations toward employees on leave, and instead pay particular attention to the timing of the obligations owed to them.
However, the outcome of this decision would likely have been very different if the employer had not been winding down its operations. Had Lewis'; position not been clearly eliminated in the course of winding up operations, the employer would potentially have been exposed to claims for discrimination and reinstatement.
Craig Stehr practises employment and labour law with Nelligan O'Brien Payne LLP LLP, a full service law firm in Ottawa.
[This article is reprinted with permission and first appeared in the September 2010 issue of The Lawyers Weekly.]