Employee’s Right to Retire During Termination Notice Period

Written by on November 17, 2010 in Employment Law Blog
Retirement during Termination Notice Period

An employee receives notice from his employer that his employment will be ending. Before the termination date, however, the employee hands in his retirement notice, which puts him in a position to receive post-retirement health insurance benefits. Did the employee actually have the contractual right to retire? Did the employer’s earlier notice of termination cancel out the employee’s right to do so?

Such questions were answered in the Ontario Superior Court of Justice when George De Groot took on his employer, the Town of Tecumseh.

The Employment Contract—Did it Bar Retirement?

The Town had entered a fixed-term employment contract with De Groot, who became the Director of Public Works and Environment Services. The contract began in 2005 and stated that if no further agreement was made to renew the contract, then De Groot’s employment would terminate on June 13, 2010. Six months before that date, the Town accordingly provided De Groot with notice of his termination.

The Town’s policy manual, however, was an appendix to the contract and allowed employees reaching age 55 to retire and thereafter to receive continued health insurance benefits. Three months after the notice of termination, De Groot delivered the Town a letter stating his intention to retire on June 13, 2010.

The Town felt that the policy manual’s provisions for retirement could not apply to De Groot in view of the employment contract’s “entire agreement” clause, which allowed the contract to supersede in the case of any conflict with the Town’s policy manual. The Town pointed out that the contract was a fixed-term contract with specific terms for either party to terminate, which terms did not include retirement.

Justice J.R.H. Turnbull, however, found no conflict between the contract and the policy manual, as they each governed two different situations. That the Town did not delete any of the manual’s provisions regarding retirement was also an indication that the retirement provisions had become part of the employment contract. The contract itself, therefore, did not negate De Groot’s right to retire.

Termination—Its Effect on a Subsequent Retirement Notice

If the contract did not prevent De Groot from retiring, then was he barred from retiring by the fact that the Town’s notice of termination came in advance of his own notice of retirement?

In answering this question, the Court considered the case of Young v. Newfoundland Dockyard Corp. This case addressed a similar scenario in which “the employee’s right to retire survived the termination of his right to work.” Seen from another angle, the continuing validity of an employment contract in light of a termination notice was confirmed in the case of Suleman v. British Columbia Research Council. There, an employee issued a claim for wrongful dismissal damages and was unsuccessful due to having issued the claim prematurely, before the end of the notice period.

In the case of De Groot v. Tecumseh, the issues did not hinge upon who was the first to exercise the right to terminate the employment contract. Justice Turnbull concluded that neither the Town’s notice of termination, nor De Groot’s later notice of retirement put an end to the original employment contract signed in 2005. The contract remained in effect until the end of the notice period, during which time both the employment relationship and its related benefits and obligations continued. As such, De Groot’s right to retire was upheld.

See De Groot v. Town of Tecumseh, 2010 ONSC 5748

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