Employers often struggle with how employees who are on unpaid leave should be dealt with when there are significant changes occurring in the workplace. The British Columbia Court of Appeal struggled with this issue too in Lewis v. Terrace Tourism Society and the outcome of the decision is instructive to employers and employees alike.
Jennifer Lewis was the executive director of the Terrace Tourism Society from 2004 to December 2006 when she went on an unpaid maternity leave. She was scheduled to return to work in January 2008. During her absence, the Society found itself in dire financial circumstances due to changes in its funding structure.
In early 2007 the Society’s Directors resigned en masse after laying off the interim executive director who had been hired to cover Ms. Lewis’s leave, and effectively the Society ceased operations. By a vote of the members of the Society, it was decided that the Society would be dissolved. The issue of the termination of Ms. Lewis’s employment was under consideration.
In March of 2007, before the Society could offer Ms. Lewis a severance package, she commenced a small claims proceeding against the Society in which she sought damages for wrongful dismissal. The Society took the position that Ms. Lewis had not been terminated because they had not given her actual notice of termination. They said that Ms. Lewis’s employment was terminated for cause because she had commenced the small claims proceeding and in that case the Society did not have to pay Ms. Lewis any severance.
Ms. Lewis then sued the Society in Supreme Court for damages related to the termination of her employment.
The trial judge found that Ms. Lewis’s employment had not been terminated by the steps the Society took to wind up its operations and that the Society was entitled to terminate the contract of employment provided it gave reasonable notice of provided severance pay in lieu of reasonable notice. Since Ms. Lewis was on maternity leave and not due to return to work until January 2008, the Society was not able to give working notice, but intended to offer reasonable severance pay in lieu of such notice.
Effectively, the Court found that Ms. Lewis had “jumped the gun” by suing the Society before it could make an offer of severance and that the Society was justified in terminating her employment as a result.
The B.C. Court of Appeal, in a split decision, disagreed. A majority of the panel hearing the appeal held that Ms. Lewis’s employment was terminated by the Society when the members of the Society resolved to cease operations and terminate her position. That being the case, her commencement of the small claims proceeding against the Society did not provide the Society with grounds to terminate her employment.
The Court held that Ms. Lewis’s rights as a terminated employee on leave were no different than any other employee. She was entitled to take the position that by ceasing operations and closing down its offices, the Society had in effect terminated her employment.
The Court went on to opine that even if the Society’s actions in ceasing operations didn’t terminate Ms. Lewis’s employment, her commencement of the small claims proceeding did not give the Society cause to terminate her employment. The Court wrote:
In these circumstances, where all of the indicia of the employment relationship had ended with the employer’s cessation of business, it would constitute a “trap for the unwary” to hold that an employee cannot sue to have a court declare her rights without risking a finding that she had, by doing so, repudiated whatever vestige of the employment contract might remain.
What we can take away from this decision is:
- An employee’s legal right to reasonable notice that his or her employment is coming to an end is not suspended or altered while the employee is on leave.
- Employees who are dismissed while on leave should be treated like any other employee and should be given notice of termination and/or severance in a timely manner.
- Employers cannot use leaves as an excuse for a delay in giving employees on leave notice or severance.
Joni Metherell is a member of Pushor Mitchell’s Employment Law Group. She can be reached at (250) 869-1200, or by email at [email protected].
