WORKING NOTICE UPDATE – ASSESSING THE RISKS
I.
INTRODUCTION
It has long been established in British Columbia that, absent express agreement to the
contrary, the common law will imply that an indefinite term employment agreement may
only be ended with just cause or reasonable notice: Henderson v. Canadian Timber and Saw
Mills Limited (1906) 12 B.C.R. 294 (C.A.). For more recent case authority, see: Machtinger
v. HOJ Industries Ltd. [1992] 1 S.C.R. 986. Reasonable notice is a working notice period of
reasonable length.
Many, if not most, employers provide pay in lieu of reasonable notice when ending an
employee’s employment. Where the pay is by lump sum it is commonly called severance.
Where the pay is spread over the notice period, it is commonly called salary continuance. In
this paper, I ask why more employers do not provide reasonable working notice as is lawfully
required?
Making a severance payment or providing salary continuance instead of providing working
notice is not an implied term of an employment agreement. This is explained by the Court of
Appeal in Dunlop v. B.C. Hydro and Power Authority [1988] B.C.J. No. 1963 (C.A) at p.3:
The implied term is a term to the effect that each party must give reasonable notice of
termination to the other.
The implied term is not a term to the effect that the employer may give pay in lieu of notice.
This means, employers who end an employment agreement immediately have wrongfully
dismissed an employee. An offer of payment, even a generous one, be it as a lump sum or
over a period of time, is merely compensation for damages. In the words of our Court of
Appeal in Dunlop, supra:
… when an employer gives pay in lieu of notice, he does so as an attempt to compensate for
his breach of the contract of employment, not as an attempt to comply with an implied term
of the contract of employment.
So, should employers choose to pay in lieu? Or, is it better to provide reasonable notice?
II.
WORKING NOTICE OR PAY IN LIEU
Before discussing the merits of providing notice, this paper briefly examines the alternative:
immediate termination in breach of the employment agreement.
The decision whether to provide working notice or to breach the agreement and pay
compensation in lieu of the notice is often driven by the operational requirements of the business.
1
A. Considerations For Providing Pay In Lieu
As payment in lieu of notice flows from a breach of the employment agreement, it should only make
sense for an employer to breach and provide pay in lieu where it is furthers the business’ purposes.
Employers may wish to consider the following in deciding whether to breach the employment
agreement and pay compensation for damages rather than complying with the agreement and providing
notice:






Why the employee is being dismissed. If, for example, the employee is being dismissed for poor
work performance, providing working notice means enduring the poor work performance for
the notice period. It may be more efficient for the business to pay compensation in lieu of
notice.
Whether the employee’s position continues to exist. If, for example, the employee’s position has
been eliminated, there may not be a place to allow the employee to work out his or her notice
period [Query, however, why the employer did not give notice prior to the position being
eliminated]. As another example, if the employer has hired a replacement employee who is
performing the terminated employee’s duties, there may be no work for the terminated
employee to perform during the notice period. [In fact, the terminated employee’s presence
may actually be disruptive to the new employee].
Whether the employee poses a security risk during the notice period. For example, does the
employee have access to sensitive computer data, and if so, is the employee of a temperament
that he or she would try to sabotage this data?
Whether the employee poses a business risk during the notice period. In the movie Jerry
Maguire, Tom Cruise’s character returns to the office after being dismissed to spend the next
hour trying to convince the business’ clients to come with him on his new venture. In B.C. similar
conduct would be subject to considerations of fiduciary duties and conflict of interest, however,
an employer may still wish to ask whether an employee is likely to use the working notice period
to advance interests which compete with or are otherwise prejudicial to the interests of the
business.
Whether the employee’s working would negatively affect morale. Receiving notice of
termination is an emotional blow for most employees. Having in the workplace an employee
who is unhappy, angry, or otherwise negatively affected by the notice may decrease morale for
other employees.
Whether to provide notice or pay in lieu is the employer’s decision. After all, it is the employer’s
breach that is the condition precedent to a payment in lieu.
From an employee’s point of view, the employee generally prefers to be terminated immediately
and receive a lump sum severance as this allows favorable tax structuring through the use of retiring
allowances and places the employee in the position where he or she may receive a 2 windfall by
quickly finding new employment. However, the employee is usually a passive participant in the
employer’s decision to immediately terminate or provide reasonable notice. Some employees will
2
ask for a package, but (absent express contractual agreement to the contrary) an employee may not
compel a payment of severance. I have had employees suggest they could behave poorly or
antagonize management to maximize the likelihood the employer would offer a severance package.
However, this creates a risk for the employee that the employer will discipline for misconduct, and
may even terminate the employee for cause prior to the end of the notice period.
B. Potential Problems With Immediate Termination
Given the foregoing, it may appear breaching the employment agreement by immediately
terminating the employee and making a payment in lieu of notice is always in the best interests of
an employer; such is not the case. Some of the disadvantages with making a lump sum severance
payment may include:





Losing the employee’s services during the notice period. By breaching the agreement, the
employer pays compensation for those services and receives no benefit from the employee
in return.
Allowing the employee to realize a windfall. An employee who mitigates quickly by finding
new comparable employment will suffer no loss of income and may realize a windfall
severance package. [I note two points: First, employers have tried to avoid the windfall issue
by providing pay in lieu as salary continuance and providing for an incentive or “balloon”
payment if the employee finds a new job. (Please see the next section for a discussion on
the option of salary continuance). Second, often employers will build into lump sum
payments discounts to account for the contingency of an employee mitigating].
Liability for non-salary losses. Most insurance plan coverage ends on the employee’s last
active day of employment. However, absent a release, employers may be liable for
insurance benefit losses incurred during the notice period by the employee: Prince v. T.
Eaton Co. (1992) 67 B.C.L.R. (2d) 226 (C.A.). This can be a significant liability. By giving the
employee working notice, an employer can continue insurance coverage and protect itself
from claims for loss of same.
Costs of lump-sum payment. A lump-sum payment is more costly to a business than smaller
salary payments over the notice period. If one adds to this the additional costs of retaining
legal counsel to assist negotiate the amount of the lump sum payment, the cost increases.
For businesses who are experiencing tight cash flow, a lump sum payment on termination
may not be an option.
Risk of immediate litigation. Once the employer breaches the employment agreement, the
employee can begin litigation forthwith. Defending litigation costs an employer time and
money. By providing notice, the employee risks repudiating the employment agreement by
bringing an action during the notice period. [This issue is discussed later in this paper].
3
III.
THE OPTION OF SALARY CONTINUANCE
Salary continuance is where an employer ends an employee’s employment, but continues to pay to the
employee that employee’s regular salary and benefits during the notice period. Salary continuance may
be offered by an employer as compensation for its breach of the employment agreement, imposed on a
without prejudice basis pending negotiations about pay in lieu of notice, or a combination of these two.
A. Salary Continuance Language A simple form of a sample termination letter offering salary
continuance is attached as Appendix “A”.2
The sample termination letter provides for a “balloon” clause. These types of clauses are fairly common
in salary continuances and provide that if an employee finds a new job, salary continuance payments
will end, and the employee will receive an incentive bonus payment. This incentive bonus payment is
commonly set as a percentage of the balance of the salary continuance payments left in the notice
period (in the sample letter, it is set at 50 percent). In effect, the employee’s new job triggers an
immediate payment (i.e., the “balloon”) of a smaller portion of the balance of the salary continuance.
The purpose of the balloon clause is to encourage the employee to find a new job; the faster the
employee becomes re-employed, the larger the balloon payment. Of course, the employer benefits from
the employee quickly finding a job as the new job mitigates any damages the employee may suffer as a
result of the ending of employment.
Although salary continuance does address several of the negative aspects of providing a lump sum, it
may not assist with the issue of benefit coverage during the notice period. Some insurers insist that for
coverage to continue, the employee must be actively at work (a term often defined in the insurance
policy). In theory, and from an employer’s perspective, salary continuance combines many of the best
elements of immediate termination and working notice; it allows an immediate end to the employment
relationship, while spreading the cost of the termination over the notice period and minimizing the
likelihood of the employee realizing a windfall payment.
In practice, and as a result of several recent Court decisions, there are problems with salary
continuance.
B. Jurisprudence On Salary Continuance
In the 1990s, the British Columbia Courts issued several decisions which approved of salary continuance:
see, for example, Spooner v. Ridley Terminals Inc. (1991), 39 C.C.E.L. 65 (B.C.S.C.); Marshall v. Artek
Group Ltd. (1993), 47 C.C.E.L. 229 (B.C.S.C.); Polak v. Surrey Memorial Hospital Society [1996] B.C.J. No.
131 (S.C.).
The ratio behind these decisions was that even though an employer had breached the employment
agreement by ending the employee’s employment without notice, providing salary 4 continuance was a
bona fide form of damages available to compensate the employee for this breach. In Marshall, supra, at
p. 231, Meredith J. characterizes salary continuance as follows:
4
The plaintiff argues that “the defendant cannot deprive the plaintiff of the right to obtain a judgment in
a lump sum by paying him periodically”. I think the submission is in error. It overlooks the fundamental
aim of a damage award, that is to say, to put the plaintiff, so far as is possible, in the same position as if
there had been no breach of the contract. Thus, the plaintiff should be awarded an amount resembling
as closely as possible what he would have received had he been given adequate notice and had worked
out the period of notice. In that case, if the notice period was adequate, the plaintiff would have received
his salary, pay period by pay period. It follows that if the employment of the plaintiff is terminated, he
will be fully, appropriately and adequately compensated if the defendant continues to pay his salary.
In recent years, the British Columbia Courts appear to be resiling from the position that damages paid
out over a period of time will always adequately compensate an employee for a breach of the
employment agreement.
In Light v. City of Richmond [1998] B.C.J. No. 102 (S.C.), the Court rejected an employer’s attempt to
provide salary continuance following termination and failed negotiations about the quantum of a lump
sum severance payment. The Court held salary continuance is only available where an employer offers it
in the original termination letter. In this case, the City of Richmond's termination letter had only offered
a lump sum payment. The Court disallowed the employer’s attempt to unilaterally begin salary
continuance and ordered a lump sum award.
Further limitations on the availability of salary continuance as a method of compensating a plaintiff for a
breach of the employment agreement as a result of termination without notice were imposed in Albach
v. Vortek Industries Ltd. 2000 BCSC 1228. In Albach the defendant offered the plaintiff (formerly a senior
executive in the company), 18 months’ salary continuance. The salary continuance offer contained a
balloon clause which provided salary continuance would end and the plaintiff would receive 50 percent
of the balance of the payments as a lump sum.
The defendant also offered to continue the plaintiff’s health and welfare benefits, except for long term
disability. The defendant offered to pay an amount equal to the cost of the long term disability
premiums for the length of the notice period, or the actual cost the plaintiff incurred replacing the long
term disability benefits.
The Court in Albach accepted the plaintiff’s argument that the defendant’s offer of salary continuance
did not adequately compensate him for the breach of the employment agreement. While recognizing
that the use of salary continuance has been approved in British Columbia, Brooke J. held that offers of
salary continuance will not be automatically sanctioned by the Courts. Brooke J., citing Polak (and
considering both Marshall, supra and Spooner, supra), held that the Courts will consider two factors in
assessing the appropriateness of salary continuance [at para. 16]:
(a) “The conditions attached” to the salary continuance; and 5
(b) Whether the salary continuance is for a period “reasonably equivalent to a lump sum award in lieu of
notice”.
5
Brooke J. further qualified the second condition by holding that the reasonable notice period for which
salary continuance is offered must be at “the higher end of the appropriate range” [para. 18]. The
learned trial judge noted in obiter that if the defendant had offered 24 months (the higher end of the
notice range) instead of 18 months (the lower end of that range), he may have approved the use of
salary continuance.
In rejecting the defendant’s offer of salary continuance, Brooke J. commented as follows [paras. 20-21]:
It seems to me that salary continuance may be appropriate on termination where it is expressly provided
for by contract of employment or where it is offered and accepted upon termination. An unaccepted
offer has no contractual consequence. If, as in Polak the offer of salary continuance is equivalent to a
lump sum award in lieu of notice that may discharge the employer's obligation. If it is not equivalent
then in my opinion the court should be slow to make what may be seen as the equivalent of a contract
for the parties.
In the result I am satisfied that the notice was unreasonable, the dismissal is therefore wrongful and I see
no reason to depart from the principle that damages are awarded in a lump sum once and for all.
In Moody v. Lafarge Canada Inc. 2000 BCSC 1847, the Court followed the Albach decision and rejected
the defendant’s offer of salary continuance. The Court ordered a lump sum payment of damages based
on the following reasoning [para. 25]:
I am not satisfied that a salary continuance is appropriate. Lafarge terminated the plaintiffs’
employment which it was entitled to do. It did not however provide reasonable notice of that. … The
breach by Lafarge is in failing to give reasonable notice. The plaintiffs’ claim for damages is based on a
calculation of the notice period multiplied by their monthly salary. There is no agreement to accept
salary continuance in the event of dismissal nor an acceptance by the plaintiffs, upon their termination
of employment, of a payment on a monthly basis for the appropriate notice period.
In Leung v. MDSI Mobile Data Solutions Inc. 2002 BCSC 1597, the defendant’s offer of salary continuance
provided payments to the plaintiff would be cancelled if the plaintiff found new employment during the
notice period. The Court, again following Albach, held that because of this condition, the salary
continuance was less valuable than a lump sum payment. The Court, accordingly, refused to accept the
salary continuance as an acceptable form of compensation for the employer’s breach of the
employment agreement. The Court ordered a lump sum payment of damages.
C. Employer Considerations About Salary Continuance
An employer who wants to implement an effective salary continuance today must generously estimate
the notice period range and offer a salary continuance at the upper end of that range. This could make
an offer of salary continuance potentially more expensive than a lump sum severance package or
providing working notice.
The employer is also restricted in the conditions it can impose on a salary continuance offer.
Preconditions such as termination of the salary continuance on the employee finding a new job (even
6
perhaps termination with a balloon clause) may result in a Court awarding lump sum damages instead of
upholding the salary continuance offer.
It is possible other common conditions on salary continuance offers would also serve to render those
offers insufficient compensation for the breach of the employment agreement, including requiring an
employee to:



Report on his or her job hunting progress and efforts;
Agree to restrictive covenants, such as non-solicitation or non-competition provisions; and
Execute a general release in favour of the employer.
An interesting future issue is what happens where an employer does offer unconditional salary
continuance which is accepted by the employee, and the employee finds work during the notice period.
Is the employer obliged to continue the salary continuance? Will this not result in the employee being
double compensated for his or her original loss from the breach of the employment agreement?
It appears salary continuance is considered to be a new offer following the breach of the employment
agreement. Accordingly, if it is made without preconditions, and the employee does find new
employment during the notice period, there appears to be a good argument that the employer is
required to continue the salary continuance payments.
Given the foregoing, is there any advantage to salary continuance for employers? While not as useful as
it once was, salary continuance still:




Spreads out the cost of termination, which may help cash flow;
May allow for some benefit continuation, which would protect the employer from claims for
benefits which arise in the notice period;
May deter an employee from bringing an action as the employee is receiving income; and
Is effective to discharge an employer’s liability for immediate termination of the employment
agreement, subject to a challenge in Court.
D. Employee Considerations About Salary Continuance
An issue for many employees is how to respond when an employer offers salary continuance.
On the one hand, the salary continuance offer is likely not to be as favourable as a lump sum payment. It
will probably have preconditions attached which result in a smaller total payout if employment is found
during the notice period. It may also be less favourable from a tax perspective.
On the other hand, the employee no longer has a job, needs an income, and will likely be tempted to
accept the salary continuance pending negotiations about a lump sum severance or court action.
There is a risk to an employee in accepting salary continuance pending negotiations about severance. A
Court may find the employee, by his or her conduct, agreed or acquiesced to the salary continuance
offer.
7
Employee counsel may wish to ensure if the employee is continuing to accept the salary continuance
payments while negotiating or litigating the quantum of severance, that this acceptance is on a without
prejudice basis to the employee’s right to demand a lump sum payment.
IV. WORKING NOTICE
A. Giving Working Notice
Working notice must be clearly communicated to the employee. The notice must be specific, clear and
unequivocal such that a reasonable person would be led to the clear understanding that his or her
employment is at an end as of some date certain in the future: Kalaman v. Singer Valve Co. (1997), 31
C.C.E.L. (2d) 1 (B.C.C.A.). The Court will examine the notice objectively and consider all the
circumstances of each case to determine whether the notice is sufficiently specific, clear and
unequivocal.
Mister Justice Wood, writing for the Court of Appeal in Gibb v. Novacorp International Consulting Inc.
(1990), 48 B.C.L.R. (28) (C.A.), described the requirement for notice as follows [at p. 34]:
I do not think that in order to be specific and unequivocal, the notice given must necessarily use the
words “you are hereby dismissed effective …” or some such equivalent. If the words used are such as
would lead a reasonable person to the clear understanding that his employment is at an end as of some
date certain in the future, it may well be that specific, unequivocal notice has been clearly
communicated. It must in every case depend on all the circumstances in evidence.
Notwithstanding Mister Justice Wood’s directions in Gibb, it appears good practice to clarify in writing
that the employee is “hereby dismissed” after a period of working notice and as of a set date.
At the trial level in Kalaman, [1996] B.C.J. No. 814 (S.C.), the Court held that a notice which suggested
the employee may be rehired in a different capacity at the end of the notice period was not sufficiently
clear and unequivocal. Even though this finding was reversed on appeal on the authority of Gibb, a
clearer notice may have avoided this litigation.
In Elderfield v. Aetna Life Insurance Co. [1995] B.C.J. No. 1018 (S.C.), the trial judge held that notice
which suggested that the employee would receive a severance package or an alternative position in the
company did not constitute proper working notice. The Court of Appeal affirmed this finding of fact.
A sample termination letter offering working notice is attached as Appendix “B”.
Although I am not aware of a common law requirement which specifically requires notice to be in
writing, it appears good practice to ensure that it is. Oral notices are subject to misinterpretation and
are less likely to be clear and unequivocal than written notice. Further, if the notice is not in writing, the
employer will not discharge its statutory liability for termination pay. The Employment Standards Act,
R.S.B.C. 1996, c.113, section 63, requires notice of termination to be in writing; oral notice is not valid.
8
B. Working Beyond The Notice Period
Allowing an employee to work beyond the end of the notice period likely vitiates the working notice at
common law and certainly vitiates it under the Employment Standards Act.
Section 67(1)(b) of the Employment Standards Act provides that notice is not effective where an
employee works beyond the end of the notice period. For example, take an eight month notice period
which ends December 31, 2003. Even though this notice period is clearly in excess of anything required
by the Employment Standards Act, if the employee worked on January 1, 2004, the employee would be
entitled to a new statutory termination notice period or pay in lieu.
At common law, an employer who allows an employee to work beyond the end of the notice period
risks creating confusion and uncertainty about the notice (e.g. did the employee’s employment really
end, or is it continuing?). If the notice becomes unclear and equivocal, there is a risk a Court would hold
that it is not valid. Where the employer finds that it needs an employee to work a few days beyond the
end of the notice period, it appears better practice to enter into a new written employment agreement
with the employee which recognizes the employee’s employment has ended, and that the employer is
retaining the employee’s services on new terms and conditions for a set period of time.
C. Retracting Working Notice
Once working notice has been provided, an employer likely will not be able to unilaterally amend or
retract that notice. The Court of Appeal in Elderfield v. Aetna Life Insurance Co. of Canada [1996] B.C.J.
No. 1817 (C.A.) considered this issue. In Elderfield, the employer gave improper and invalid working
notice. The improper notice suggested the employer would provide a severance package or provide
alternative work. Prior to the notice expiring, the employer sought to give proper, specific and
unequivocal working notice.
The employee refused to accept the latter notice and brought an action. The employer argued as its
improper notice had not yet been accepted, the employment agreement continued to exist for the
benefit of both parties. This, the employer said, is in accordance with the general principles of contract
law, and allowed the employer to retract the improper notice and issue proper, lawful working notice.
The employer further argued the 9 employee’s refusal to work during the notice period set out in the
proper, lawful notice amounted to a resignation. Madam Justice Huddart agreed with the employer’s
argument, but held that, on the facts, that the employer by its conduct had otherwise repudiated the
employment contract. The employee was entitled to accept the employer’s repudiation at the end of
the improper notice and to sue for damages. Madam Justice Newbury, writing concurring reasons, held
that once notice has been given, an employer may not unilaterally re-elect to provide additional working
notice.
In Zaraweh v. Hermon, Bunbary and Oke [2001] B.C.J. No. 1896 (C.A.), the B.C. Court of Appeal appears
to have adopted Madam Justice Newbury’s reasoning in Elderfield. The Court in Zaraweh, citing
Elderfield with approval, held that in the absence of mutual agreement, an employer is not entitled to
unilaterally alter working notice.
9
Based on Zaraweh, the law today appears that notice, once given, may not be unilaterally amended by
an employer. D. Illness, Pregnancy and Other Absences During the Notice Period Under the Employment
Standards Act, notice given to an employee has no effect if the notice period coincides with the
employee’s pregnancy or a leave or illness: Section 67(1)(a). The Branch’s interpretation guidelines
describe the statutory requirement as follows:
A notice period cannot begin while an employee is on vacation, jury duty, strike, lockout, banked time,
temporary layoff, or other leave (either employer-granted or as provided by statute). If, after notice is
given, an employee is on leave under Part 6, Leaves and Jury Duty, strike or lockout, or is unavailable for
work … for medical reasons, the notice period is interrupted and resumes upon conclusion of the
interruption. An employer cannot require an employee to take vacation during the notice period.
Similar considerations appear to apply for common law notice. In Elderfield, supra, the Court of Appeal
recognized it was “common ground that the [plaintiff employee’s] period of notice could not coincide
with her vacation leave … or her pregnancy and parental leaves” [at para 13].
The law appears clear that time spent on pregnancy and parental leave will not count as part of the
reasonable notice period: Whelehan v. Laidlaw Environmental Services Ltd. [1998] B.C.J. 847 (S.C.);
Winterburn v. Domtar Inc. 2002 BCSC 1418. The policy behind this is ostensibly to prevent unscrupulous
employers from giving working notice immediately prior to an employee beginning a pregnancy leave.
It is less clear how a period of illness affects the reasonable notice period. Where an employee is
dismissed without notice, a subsequent period of illness will not affect that employee’s claim for
damages: Sylvester v. British Columbia [1997] 2 S.C.R. 315. In Sylvester, the Supreme Court stated this
principle as follows [at para. 9]:
The fact that an employee could not have worked during the notice period is irrelevant to the
assessment of these [wrongful dismissal] damages. They are based on the premise 10 that the employee
would have worked during the notice period. Therefore, an employee who is wrongfully dismissed while
working and an employee who is wrongfully dismissed while receiving disability benefits are both
entitled to damages consisting of the salary the employee would have earned had the employee worked
during the notice period.
This reasoning suggests a period of illness would not count towards the notice period. To conclude
otherwise would result in the employee who received working notice receiving less compensation than
the employee who was wrongfully dismissed. In other words, the Court would be putting an employee
whose employment agreement was breached in a better position than the employee whose
employment agreement was honored. This is contrary to the principles of contract law and strongly
indicates that periods of illness do not count as part of the notice period.
Working notice issues with respect to pregnant or ill employees are usually further complicated by
human rights considerations. These considerations are beyond the scope of this paper. However, even
without human rights considerations, the foregoing reasoning creates a dilemma for employers. This
dilemma is well illustrated in the following examples:
10
Example A:
Employer A chooses to comply with the employment contract and gives Employee X working notice.
Working notice is 18 months. During the working notice period Employee X is ill for an aggregate of four
months and on pregnancy leave for the final five months. Employee X demands nine months pay in lieu
of notice.
What are Employer A’s options given that, under Zaraweh, supra, Employer A cannot amend of extend
the notice period without Employee X’s consent.
Example B:
Employer B also complies with the employment contract and gives Employee Y working notice. Working
notice is six months. After receiving working notice, Employee Y becomes depressed and stressed and
takes medical leave for the entire working notice period. At the end of the notice period, Employee Y
demands six months’ severance.
Providing Employers A and B continued the normal pay of the employees, notwithstanding that these
employees were off work and may not have been entitled to pay, likely would eliminate subsequent
liability. However, such action may also create an apparently incongruous result. An employer may have
two employees absent on sick leave concurrently. The employer may have to pay the one who has been
given working notice, but not pay the other who has not.
Perhaps the answer to the foregoing examples is that pay need not continue during an absence (if the
employee would not normally be paid), but that notice will be extended for the period of the absence.
I anticipate we will not have to wait long before a Court considers these issues.
These types of dilemmas and the jurisprudence underlying them have created uncertainty for the
employer who wishes to honour an employment agreement and give notice. It is ironic that the same
jurisprudence has created certainty, and thereby increased the incentive, for employers who breach the
employment agreement and pay damages in lieu of notice.
E. Employees’ Duties During The Notice Period
An employer has the right to expect an employee to make his or her services available during the notice
period: Suleman v. B.C. Research Council [1990] B.C.J. No. 2707 (C.A.).
In Suleman, the employer provided six months’ working notice. The employee, who was ill, did not
attend work, but brought an action for wrongful dismissal. The Court of Appeal held [p. 4]:
In other words, the contract of employment is not terminated until the end of the notice period and
during that period the employer has the right to the services of the employee. It follows that the
employee must remain ready and willing to carry out the contract of service.
11
While the law appears clear that an employee must remain ready and willing to provide services during
the working notice period, at least one decision in British Columbia suggests that an employee who has
been given notice may divide his or her time between acting in the best interests of the employer and
seeking alternative employment: Elms v. Hywel Jones Architect Ltd. [1997] B.C.J. No. 1084 (S.C.).
The apparent ratio behind Elms, although not yet expanded upon by other British Columbia courts, has
been addressed in New Brunswick. In New Brunswick, the Court of Appeal held that the principle
purpose of a notice period is to provide the employee time to find a new job. The New Brunswick Court
requires an employer to provide an employee the opportunity to seek alternative employment during
the notice period for the notice period to be considered valid: Bramble v. Medis Health and
Pharmaceutical Services Inc. [1999] N.B.J. No. 307 (C.A.).
A trend toward requiring employers to provide employees the opportunity during the working notice
period to job hunt raises a sociological question about notice periods: is a notice period a judicially
mandated social safety net following loss of a job and before the public safety net (i.e., employment
insurance) takes effect? If notice periods are social safety nets, then allowing time to job hunt appears
imperative. If they are not, there appears no basis in contract law to justify amending the employment
agreement to allow the employee to reduce his or her duties in favour of seeking alternative
employment.
F. Effect Of An Action
An employee who brings an action for wrongful dismissal against an employer during the working notice
period risks repudiating the employment agreement.
Mr. Justice Hutcheon, giving his judgment in Suleman, supra, said [p.2]:
It seems to me that the commencement of the action was either an acceptance by Mrs. Suleman of a
constructive dismissal, if she could establish that result, or a repudiation by her of her contract of
employment if she failed to establish that result.
In Podas v. Pacific Press Ltd. (1991), 61 B.C.L.R. (2d) 196 (C.A.) the Court held at page 199:
In Suleman, as here, there was a repudiation of the contract of employment by the issue of the writ and
statement of claim.
In C.A.I.M.A.W, Local 4, v. British Columbia (Director of Employment Standards Branch) (1993), 48
C.C.E.L. (B.C.C.A.), the Court noted at page 176: ... having failed on the issue of constructive dismissal,
the writ amounted to the employee's repudiation of the contract of employment.
At the trial level in Zaraweh, (2000) 49 C.C.E.L. (2d) 77 (B.C.S.C.) the Court distinguished Suleman, Podas
and Hulme on the basis that the employees involved in those cases appeared to have refused to do any
further work for the employer. The Court concluded: I do not consider that an employee who does no
more than issue a Writ and file a pleading alleging a wrongful dismissal when given working notice that
12
is less than reasonable is to be denied her remedy if she is prepared to continue working for her
employer and does so until the employer terminates the contract.
This finding was reversed on appeal where the Court in Zaraweh, supra, held [at para 21]:
On my view of the pleadings and the case law, I do not consider that [the trial judge’s] view can hold, and
I am of the view that the acts of issuing the writ and statement of claim and serving them on the
[employer] were conduct incompatible with continuation of the contract of employment. Absent a prior
repudiation by the [employer] which would allow Ms. Zaraweh to elect to end the contract, or which
alternatively could be viewed as justifying her termination of the contract, such actions must be viewed
as unjustified repudiation by Ms. Zaraweh.
Accordingly, the law in British Columbia remains that an employee who brings an action for wrongful
dismissal during the working notice period will have repudiated the employment agreement. An
employer may accept the employee’s repudiation and end the employment agreement summarily.
It should be noted, however, the Court in Zaraweh emphasized that not every action by an employee
against an employer will amount to a repudiation of the employment agreement. The Court held [at
para 22]:
… I refer only to the facts of this case which were issuance of a writ of summons and statement of claim
seeking general and punitive damages, some time before the end of the working notice. It may be that
not all actions by an employee against an employer are of the same nature. For example, an action for a
declaration as to a contract’s continuance or for an injunction … may have a character compatible with
performance, not breach, of a contractual obligation.
From an employer’s perspective, a restraint on an employee from bringing an action is a tremendous
advantage. There is a good chance the employee will mitigate his or her damages during the notice
period by finding a new job. The notice period and possible mitigation may well reduce an employee’s
claim to a point where it is no longer worth pursuing damages in Court. The restraint on an employee
bringing an action is not necessarily unfair. If an employer provides a reasonable working notice period
or if the employee mitigates during the notice period or both, the employment agreement is either
honoured or damages are not suffered. In such circumstances the employee continues to receive an
income and the workload for the Courts is reduced. The only disadvantage is the employee does not
have the chance to realize the windfall he or she would with a lump sum severance payment.
Plaintiff’s counsel who do not want to be fettered by waiting for the notice period to end may be best
served bringing an immediate action for a declaration as to the appropriate reasonable notice period.
Given the prohibition against employers unilaterally amending the notice period, a finding that the
reasonable notice period exceeds the notice provided likely will lead to a prompt resolution of any
dispute (subject to discounts for possible mitigation).
13
G. The Requirement To Provide Work
Historically, the English Courts, with certain exceptions, held that there was no obligation on an
employer to provide work during the working notice period: Freedland, The Contract of Employment
(Oxford, Clarendon Press: 1976). The exceptions set out by Professor Freedland are [at pp. 24-25]:
(a) Employees whose remuneration is based on commission or piecework and who, if they do not work,
earn no remuneration.
(b) Employees who have specifically contracted for a specific job with specific duties.
(c) Employees who gain publicity or experience from employment, such as senior executives and
directors of companies, or actors.
With respect to this final category, Professor Freedland notes [at p. 25]:
In general, the cases where damages may be recovered for loss of publicity or experience are very much
the exception rather than the rule.
This line of jurisprudence was considered by the British Columbia Courts in Park v. Parsons Brown & Co.
(1989), 39 B.C.L.R. (2d) 107 (C.A.).
In Park, the defendant company gave the plaintiff, its President and CEO, 18 months’ working notice.
The defendant treated the plaintiff as still on the payroll and gave him access to his office and parking
space. The defendant took away the balance of the plaintiff’s duties.
The trial judge held “the suggestion that the Company had not relieved the plaintiff of his function as
Chief Executive Officer by inviting him to sit in his office and use his parking space as usual can be no
more than a pretence.”
The Court of Appeal recognized that historically there was no obligation to provide work. The Court
further recognized the exceptions to this principle. Hutcheon J.A. writing for the majority held that the
plaintiff as a senior manager fell within these exceptions. Southin J.A., concurring on this issue, held that
the terms of the plaintiff’s contract did not empower the employer to provide working notice without
work.
In Suleman, supra, Mister Justice Hutcheon summarized his reasoning in Park, as follows [at p. 143]:
In Park v. Parsons Brown & Co [citations omitted], I referred to long standing authority that the
employer’s obligation to keep an employee retained and employed does not necessarily import an
obligation to supply work.
This principle was also noted and followed in Spooner v. Ridley Terminals Inc. (1991), 39 C.C.E.L. 65
(B.C.S.C.) where Macdonald J. wrote [p. 70]:
… I accept that the law does not in most cases require an employer to provide work during the notice
period …
14
Accordingly, the current law in British Columbia appears to allow an employer to provide working notice
without requiring the employee to attend at work, absent the existence of one of the above cited three
exceptions.
There continues to be uncertainty on this issue due to a conflict between providing notice without work
and constructive dismissal. This conflict is discussed in the next section.
Not requiring the employee to attend at work during the notice period may be a benefit to the
employee. It provides the employee ample opportunity to seek alternative employment. If the notice
period is to provide the employee a chance to find a new job (as suggested in Elms v. Hywel Jones
Architect Ltd., supra), then surely an employer, by not requiring attendance at work, is maximizing the
notice period’s utility to its employee.
From an employer’s perspective, providing notice without having to provide work is a tremendous
advantage as:






It allows the employer to realize the benefits of salary continuance without the risks;
Working notice without work removes the employee immediately from the workplace, thereby
avoiding problems of negative morale, poor work performance, or compromises to security or
business interests;
It avoids a cash crunch by allowing the employer to make periodic payments to the employee;
It eliminates the chance of the employee receiving a windfall payment as, if the employee finds
new employment, the employer can end the employee’s salary and benefits;
It may allow continued benefit coverage during the notice period. This will depend on the actual
terms of the contract between employer and benefit provider; and
It provides a disincentive for the employee to bring an action during the notice period, as the
employee risks a finding he or she repudiated the employment agreement by bringing the
action.
From an employee’s perspective, working notice without working is likely not as favourable as a lump
sum; the working notice removes the possibility of a windfall and is not subject to as favourable tax
structuring. For most employees, I would anticipate, it likely is preferable to actually having to attend at
work.
I have recently seen an expansion in the numbers of employers using working notice without working. I
anticipate as more employers adopt this technique, the Courts will be asked to adjudicate on the merits
and legality of working notice without work. In particular, I anticipate the issue of reconciling working
notice without work and salary continuance will arise.
Working notice without work appears substantively the same as salary continuance. The difference is
the date the employer says the employment agreement ends – the end of the notice period for the
former and the beginning of the notice period for the latter. For an employer to be able to obtain an
advantage by electing one method over the other appears to put form ahead of substantive rights.
15
H. Working Notice As A Constructive Dismissal – Change Of Terms During Notice
An employer may not unilaterally alter an employee’s terms and conditions of employment during the
working notice period. A unilateral alteration of terms and conditions will amount to a constructive
dismissal and allow the employee to stop working and to bring an action for damages: Farquhar v. Butler
Bros. Supply Ltd. (1988) 23 B.C.L.R. (2d) 89 (C.A.); Suleman, supra.
If there is no obligation to provide work during the notice period, removing completely an employee’s
duties would not appear to be a constructive dismissal. This was an issue in Suleman where the
employer replaced 50 percent of the plaintiff’s duties with other duties. The Court found there was no
constructive dismissal.
Likewise, in Podas v. Pacific Press Ltd. (1991) 61 B.C.L.R. (2d) 196 (C.A.), the Court rejected the plaintiff’s
argument that he had been constructively dismissed. The Court upheld the trial judge’s finding that the
plaintiff had retained the core functions of his employment and that 75 percent of his duties had not
been removed.
So, why is the degree of job change during the notice period relevant if all duties can be removed? The
answer may be because even during the notice period a unilateral change to a fundamental term of the
employment agreement can result in constructive dismissal. Perhaps, while a complete removal of
duties may not be a constructive dismissal, a demotion with its accompanying reduction in status and
duties may be.
A concern for employers who provide working notice without working will likely be the employee who
claims removal of his or her duties is embarrassing or a reduction in responsibility, and as such a
constructive dismissal. An employee would make this claim to secure a lump sum payment instead of
notice. Employees who claim constructive dismissal and lose are held to have resigned; this is the risk
any employee faces when deciding whether to claim constructive dismissal.
Another issue for employers who provide working notice without working will be the risk of not being
able to continue benefits. Many benefit providers refuse to provide benefit coverage to employees who
are not actively attending work. Accordingly, an employer who gives notice without work may have to
discontinue the employee’s benefits for the notice period. Depending on the scope and value of the
benefits, this discontinuation of benefits may amount to a constructive dismissal.
I. Working Notice As A Constructive Dismissal – Insufficient Notice
Can the working notice itself be a constructive dismissal?
This was the question for the court in Zaraweh, supra. In that decision, the trial judge found reasonable
notice was 10 months. The employer had given three months’ notice (which the employer had later
unilaterally extended to four months). The plaintiff argued that since providing reasonable notice was a
term of the employment agreement, she had been constructively dismissed when the employer
breached that term and provided less than reasonable notice.
16
The employer relied on Suleman, supra, for the proposition that the employment relationship was not
terminated until the end of the notice period. It argued provision of notice which is less than reasonable
cannot therefore amount to an act of termination.
The employer also argued that the principle that an employee's employment is not terminated until the
end of the notice period, regardless of the amount of notice provided by the employer, was confirmed
by both the majority and those in dissent in C.A.I.M.A.W., Local 4 v. British Columbia (Director of
Employment Standards Branch) (1993), 80 B.C.L.R. (2d) 337 (C.A.). Chief Justice McEachern, delivering
the dissent, said [page 179]:
Termination of employment, whether at common law or under the terms of a collective agreement or
statute, takes effect not at the date of notice, but rather on the maturity date of the notice unless
previously withdrawn.
The Suleman Court reached its decision on this issue based largely on the English case of Hill v. C.A.
Parsons & Co. [1972] 1 Ch. 305.
The Court in Zaraweh reviewed both Suleman and Hill and concluded [at para 27]:
Thus, the Suleman case, while saying that the contract of employment is not terminated until the end of
the notice period, did so in a theoretical framework which posed the possible repudiatory act of the
employer as being a constructive dismissal.
The Court then went on to find that the employer’s provision of three (or four) months’ notice was a
breach, but not a repudiation of the employment agreement. Given the Court’s finding that the
employee repudiated the contract by suing for wrongful dismissal, the Court was left to establish an
appropriate remedy.
The Court held the plaintiff’s remedy was the difference between the reasonable notice entitlement and
the working notice provided; in the case of Zaraweh, the difference between the 10 months found to be
reasonable by the trial judge and the three months given by the employer. The Court does suggest that
there may still be instances where notice is so unreasonable it amounts to a repudiation. In Zaraweh the
Court found there was no intention by the employer to repudiate the agreement and that its offer of
three months was “an honest misapprehension” as to its obligations.
V. REFLECTIONS ON ZARAWEH
I conclude this paper by considering the implications of Zaraweh on employment law, and in particular
on the provision of working notice.
Zaraweh balances the equities involved in ending the employment relationship by creating the following
incentives for employers and employees:
17



An employee is basically obliged to work out a notice period (assuming no other repudiatory
conduct by the employer, including provision of a wholly unreasonable notice period). Refusal to
work during the notice period is a resignation.
Assuming the notice period is not so unreasonable as to be a clear repudiation of the
employment agreement (e.g. a two week notice period for a 20 year employee), an employee
has an incentive not to bring an action for wrongful dismissal until the end of the notice period.
Bringing an action for wrongful dismissal is likely a repudiation of the employment agreement
which would allow an employer to accept the repudiation and end the employment agreement
summarily.
An employer has an incentive to provide notice periods in the range of reasonable notice.
Provision of a lesser period exposes the employer to an action for damages. Provision of a
wholly unreasonable notice period may amount to a constructive dismissal.
Overall, the result of Zaraweh appears to be that those employers who do choose to provide notice
should provide notice in the reasonable notice range (or very close to it). Employees will have every
incentive to work out the notice period, ideally finding alternative employment prior to the end of the
notice period. Actions will be kept to a minimum given the employer’s compliance with its contractual
obligations and the risk to the employee of repudiating the employment agreement.
APPENDIX “A” – SALARY CONTINUANCE LETTER
<Company Letterhead>
<Private and Confidential>
<Employee name>
<Employee address>
Dear : <Employee>:
It is with regret that we must inform that <Company> has decided to end your employment effective
immediately. We made this decision as <Reason for termination>.
Kindly return all company property, including your office keys and company credit cards to us as soon as
possible.
The company wants to provide you every assistance in your career transition to a new organization and
should you require a reference letter or other assistance locating alternative employment, please do not
hesitate to ask.
As a severance package, and to assist you financially until you find a new job, the company will pay to
you your regular salary, less required deductions, for a <number> month period, until <End date>,
subject to you finding alternative employment. If you find and start alternative employment, prior to
<End date> , the company will pay you a lump sum payment, less statutory deductions, equal to fifty
18
percent of the salary you would have been entitled to receive from the date you start your new
employment to <End date> .
<Address benefits issues.>
The company is pleased to be able to offer you what we believe is a generous severance package,
and one that exceeds what is required by employment standards legislation. You may wish to
seek professional advice in this regard.
Kindly sign and return the enclosed copy of the Release to confirm that you understand and
accept the terms of this offer in full and final satisfaction of any and all claims you may have
against the company by no later than <date>.
The company wishes you every success in your future endeavors and hopes the transition period
to your new organization is a short one.
Yours truly,
<Signature>
19 APPENDIX “B” –WORKING NOTICE LETTER
<Company Letterhead>
<Private and Confidential>
<Employee name>
<Employee address>
Dear : <Employee>:
It is with regret that we must inform that <Company> has decided to end your employment
effective . We made this decision as <Reason for termination>.
The company will provide you a reference letter to help you find new employment. While the
company requires you to actively attend at work until <End date>, the company will
accommodate your reasonable requests for time off to attend job interviews during the working
notice period.
During the working notice period, we require you to take vacation time currently owing. Our
records show you have <number> days of vacation. Please contact <Person> to arrange for when
you will take vacation.
Your full salary and all benefits will continue until <End date> , or until you begin alternative
employment, at which time salary and benefits will end.
19
Yours truly,
<Signature>
END NOTES
1.
2.
3.
Unless stated otherwise, all references in this paper to employment agreements are to agreements of indefinite term without
express conditions about their termination.
Letters in this paper are provided for discussion purposes only. As with all precedents, these letters are inherently generic and
should not be used without modification reflecting the specific issues of an individual case. For example, employers should
consider whether to mark the letter “Without Prejudice”. Such considerations are beyond the scope of this paper. These letters
are not meant to be legal advice and readers should seek legal advice before using these forms of letters.
Section 67(1)(a) also invalidates notice given during a strike or lockout. As strikes or lockouts only affect unionized workers, I
have not considered these circumstances.
20