Maternity leave is no excuse to delay notice, Canadian HR Reporter at 5-6 (October 18, 2010)

In Lewis v. Terrace Tourism Society, the British Columbia Court of Appeal was faced with two intriguing issues: whether an employee on maternity leave was entitled to receive reasonable notice of termination of her employment if the employer ceased operations prior to her return and whether the employee’s lawsuit against the employer, filed during the course of employment, amounted to just cause for dismissal.

In a two-to-one decision, the court determined that during unpaid leave, the employee’s legal right to reasonable notice does not change. In reversing a lower court’s finding that her lawsuit was just cause for dis- missal, the B.C. Court of Appeals raises an interesting question about the legal effect of a lawsuit on the employment relationship.

Employer closes shop

Jennifer Lewis was an executive director at the Terrace Tourism Society in Terrace, B.C. While Lewis was on maternity leave, the society found it- self in dire financial straits. It decided to wind up its operations and terminate her position.

As part of that process, it dis- missed her temporary replacement, removed Lewis’ signing authority and closed her workplace. Having received no notice of termination of her employment or payment in lieu, Lewis brought a small claims action against the society seeking damages for constructive dismissal.

As a result of that action, the society dismissed Lewis for just cause. In response, Lewis sued the society, seeking damages for wrongful dismissal or, in the alternative, constructive dis- missal. That action was dismissed and Lewis appealed.

The dissenting judge in the B.C. Court of Appeal decision, Justice David Frankel, argued during leave, the employment relationship is essentially a shell since the employee is not required to perform any services nor is she entitled to pay.

Because the nature of the changes to the society’s operations had no immediate effect on her employment status, there was no reason why the society should be expected to “keep an empty chair in an empty office” until her return from leave when it could formally give Lewis notice, he said. The society did not breach its obligations to Lewis prior to her small claims action because it intended to pay her severance, found Frankel. However, the society never gave her notice or paid severance.

Writing for the majority, Justice Risa Levine disagreed with Frankel’s conclusion, stating Lewis’ employment had ended when the society decided to cease operations and terminate her position. The society effectively dismissed Lewis when it dismissed her replacement, closed her workplace and, ultimately, terminated her position without notice, concluded Levine. The society’s delay in informing Lewis her employment had ended, apparently because she was on maternity leave, amounted to the repudiation of her employment contract, which falls under the rubric of constructive dismissal.

Despite Lewis’ absence on leave, her legal right to reason- able notice of termination was not suspended or altered, found Levine. The justice relied on a section of B.C.’s Employment Standards Act that expressly protects an employee on leave from being dismissed with no- tice that coincides with the period of leave. Accordingly, the society’s “intention to offer severance sometime in the future did not keep the contract alive,” said Levine.

No repudiation, no just cause

In reversing the lower court’s decision that Lewis repudiated her contract of employment by initiating her small claims action, the Court of Appeal found, where all the elements of the employment relationship had ended with the society’s cessation of business, it would constitute a “trap for the unwary.” This would mean an employee cannot sue for damages and assert her rights without risking a finding that she had, by doing so, repudiated whatever vestige of the employment contract might remain.

Lewis was entitled to sue for wrongful dismissal and her commencement of the lawsuit did not give the society just cause for dismissal, said the court.

Suing employer while still employed

Commencing an action against an employer can effectively end the employment relationship. For example, in Zaraweh v. Hermon, Bunbury & Oke, the lawsuit was conduct “incompatible with the employee’s continued employment,” found the B.C. Court of Appeal.

In Zaraweh, the employee sued for wrongful dismissal during the period of working notice. Lewis is distinguishable from Zaraweh because the society gave Lewis no notice whatsoever. In this context, the society’s repudiation of Lewis’ employment contract renders the issue of continuation of her employment moot, thereby allowing Lewis to sue without risking dis- missal for just cause. These cases illustrate the need to decide each case on its own unique facts.

Interestingly, an employer’s commencement of a lawsuit against an employee does not seem to signal the end of the employment relationship. One of the very few cases to deal with this scenario was the Saskatchewan Court of Queen’s Bench decision McLean v. Conter Investment Ltd. Like Lewis, this case came before the court on appeal from a small claims judgment in favour of the employer for damages, in this case arising from the employee’s negligent operation of a truck. The court upheld the employer’s contractual claim against the employee and there was no suggestion the employer had breached the employment con- tract by suing the employee.

Either party to an employment contract has an option to sue for damages and continue the employment. In practice, this legal option is unworkable and very rarely used. Indeed, it is difficult to maintain a relationship of mutual understanding and respect when one party is suing the other.

The case is going to the Supreme Court of Canada, which will determine damages.