Negotiating Terms of Resignation Permits Employee to Recant Resignation

Wells v. Conestoga Meat Packers Ltd. – Ontario Superior Court of Justice - October 25, 2007

The actions of an employer in response to an employee’s intention to resign may permit the employee to retract their resignation, thereby resulting in the employee’s termination without cause if continued to be acted upon by the employer.

The Ontario Superior Court of Justice’s decision on October 25, 2007 in Wells v. Conestoga Meat Packers Ltd. [2007] O.J. No. 4335 (“Wells”) highlights the importance of the interactions between an employee and an employer in determining whether an employee has unilaterally resigned or whether the employee has been terminated without cause.

In Wells, the employee signed an employment agreement with the employer to become the general manager and the head of the sales department. The employment agreement stated that if the employee’s employment with the employer was terminated without cause prior to the five year period agreed to, then the employee would be entitled to the remaining balance of his unpaid salary. Additionally, the agreement indicated that the employee could not unilaterally resign from his employment.

Some time after the employee was hired, the employee and some of his co-workers sent a letter to the employer stating their concerns about the operation of the company. The letter stated that the employee wished to no longer sit on the Operations Board of Directors and that the employer would be wise to start searching for a new general manager and someone else to run sales. The employer followed this recommendation and found a replacement.

The employee found that there were conflicting views between himself and the new general manager. As a result of this, the employee informed the employer that he would be willing to discuss possible ways to terminate his employment. The employer offered to terminate the employee if he agreed that the employer was not required to redeem the employee’s class B shares, pursuant to the employment agreement. The employee rejected this offer and informed the employer that he would continue to fulfill his employment obligations for the remaining years.

Despite this, the employer gave the employee a letter indicating that he was allowed to resign from his position and that his services were no longer required. The employee enacted a claim stating that he was terminated without cause and that he was entitled to the remainder of his salary as stated in his employment agreement. The employer claimed that the employee had unilaterally resigned from his employment, or alternatively that his conduct amounted to cause for termination.

The Trial Judge found that the employee had not resigned stating “it could reasonably be concluded that the [employee] asked or offered to be relieved of his responsibilities…the Board members of the [employer] were mindful of the article in the Employment Agreement prohibiting the [employee] from unilaterally terminating his employment. Because of such awareness, negotiations ensued with a view to achieving a mutually satisfactory resolution to the unsatisfactory relationship…By attempting to negotiate a settlement with the [employee]…the [employer] evidenced that they were not merely accepting the [employee’s] tendered resignation…even if [the employee’s] remarks amounted to an offer to resign, that offer was withdrawn before it was accepted…when the [employee] told [the employer] that he would continue to work for [the employer] for the balance of the five-year term of his Employment Agreement.”

Additionally, the Trial Judge stated that there was not any justification in terminating the employee for cause. The Trial Judge indicated that “Because the Employment Agreement defines –cause’, I would be required to find that the [employee] committed –a material breach of [his] duties or responsibilities resulting in a demonstrably material injury to [the employer]’…The [employer’s] position…is that [the employer] suffered a loss as a result of the [employee] unilaterally resigning from his employment. It is inconsistent to then argue that the absence of the [employee] also resulted in a demonstrably material injury being suffered so as to justify a termination of the [employee’s] employment. In my view, the material breach and the demonstrably material injury must both occur during the currency of the [employee’s] employment in order to justify cause for termination.” Since this was not found, the Trial Judge found that the employee had not been terminated for cause and was entitled to the wages for the remaining balance of time indicated in his employment agreement.

The decision that was reached in Wells provides assistance to both employees and employers. The ruling indicates that although an employee may have indicated that they are resigning, the employer’s response to the resignation may leave the employee with the ability to recant their decision. Specifically, if the employer enters into negotiations with the employee regarding the employee’s resignation and the negotiations breakdown, then the employee may retract their resignation and continue to work for the employer. By continuing to act on the employee’s resignation after the negotiations have failed will result in the employer bringing the employee’s employment to an end.

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