eCaseNote 2017 No. 08 October 2, 2017 / eCasenote

Employer’s Duty of Good Faith in Employee’s Resignation – Take Two

Avalon Ford Sales (1996) Limited v. Evans, 2017 NLCA 9


In 2015, we published an eCasenote entitled “If an Employee Quits, is that the End? Employee Resignations and Employer Responsibilities”. That eCasenote was a summary of the case Evans v. Avalon Ford Sales (1996) Limited, 2015 NLTD(G) 100, heard by the Newfoundland and Labrador Supreme Court, Trial Division. The case has since been adjudicated at the Newfoundland and Labrador Court of Appeal and the decision was released earlier this year.

The Case and Facts. Mr. Evans (the “Employee”) worked as a fleet manager at a car dealership for over 12 years. He made an error in a commercial sale of a vehicle, after which he admitted his mistake and took responsibility; however, the dealer principal and franchise owner (the “Employer”) called a meeting with the Employee and two managers, harshly criticizing the Employee. The Employee became stressed and agitated, telling one of the other managers that he was “done”. He then came back later that evening, dropped his keys and cell phone off on the manager’s desk, said “I’m done”, and left. The Employer was angry, and assumed the Employee was leaving during a busy time of the year to work for a competitor. Four days later, the Employee saw his doctor who diagnosed him with an acute stress reaction. Later that day, the Employee and Employer met, but the meeting did not go well. The Employer tossed the Employee’s medical note in the garbage and told him to leave. The Employee was unable to qualify for short term disability as the Employer indicated that the Employee had resigned on his Record of Employment.

The Issues. The primary issue dealt with at the Trial Division and again at the Court of Appeal was whether Mr. Evans voluntarily resigned. The secondary issue was the calculation of damages.

The Law. An employee’s resignation must be voluntary and unequivocal. The employer has the burden of proving that an employee voluntarily resigned. The test for voluntarily resignation is whether the employee intended to resign and whether his or her actions and words, objectively viewed, support a finding that he or she resigned.

All contracts, including employment contracts, are subject to the principle of good faith and fair dealing. It is the duty of both the employer and employee to act in good faith throughout a termination or resignation.

Decision of the Trial Judge. Justice Butler held that Evans was constructively dismissed by a breach of a major term of the employment relationship – good faith. She stated that regardless of whether Evans resigned voluntarily or involuntarily, the employer had a duty to act in good faith upon his resignation and allow him time to reconsider his resignation, which it did not.

Justice Butler further held that an employee’s resignation must be voluntary and unequivocal and the Employer failed to establish that Evans’ resignation met those criteria. It was held that the voluntariness of Evans’ resignation was undermined by his health history, personality, sensitivity, and the stress he was experiencing. She also held that Evan’s resignation was neither unequivocal nor clear. Following his resignation, Evans saw his doctor, met with the Employer, made other efforts to communicate with the Employer, and applied for short term disability.

Justice Butler ordered the Employer to pay Evans damages in lieu of notice, including for the time Evans would have spent on short term disability since the Employer had barred his eligibility.

Decision of the Court of Appeal. The Court of Appeal clarified that, before determining whether the Employer had a duty to act in good faith and whether it was breached, it must be determined whether the Employee was terminated or whether he willingly resigned. Where an alleged resignation takes place in the heat of the moment, it may not be reasonable for an employer to conclude that an employee has resigned. It is this type of situation where the duty of good faith takes effect and influences the interpretation of the employee’s words and actions in determining whether the employee resigned.

The Court of Appeal also clarified that failure to give an employee a grace period to reconsider before validly accepting a genuine resignation does not entitle the employee to collect damages for wrongful dismissal. Whether an employer should permit the employee a grace period is to be determined by the circumstances surrounding the resignation and whether the duty of good faith in these circumstances dictates that a grace period should be given. A breach of an employer’s duty of good faith does not give rise to a cause of action that is separate from an action for wrongful dismissal.

Despite some flaws with the trial judge’s analysis, the Court of Appeal affirmed the trial judge’s finding that Evans resignation was neither unequivocal nor clear and that he had been wrongfully dismissed. The trial judge’s award of damages was also affirmed.

Lesson for Employers. Resignations cannot always be taken at face value and some time for the employee to reconsider may be necessary. It is important for an employer to consider all of the circumstances that may have influenced an employee’s resignation. If there are factors present that influence the voluntariness of the resignation or if the employee’s words and action make their resignation unequivocal or unclear, it is an employer’s best interest to provide an employee reasonable time to reconsider their decision.

The comments contained in this eCaseNote provide general information only and should not be construed as legal advice or opinion. For more information or specific advice on matters of interest, please call our offices at (709) 579-2081.