How to Get Paid After Resignation

Aug 12, 2015

Recently, The Globe and Mail reported that the former President of UBC, Arvind Gupta, who stepped down from his position last week, will receive his full annual salary while on leave next school year.

Mr. Gupta’s resignation and the payment he will receive reveals how some employees may be entitled to compensation after resigning their employment. There are two primary ways that this could occur: if the employee has negotiated for the payment, or if the employee proves he was constructively dismissed.

Employment Contracts

It is common, today, for employers to require employees to sign an employment contract prior to commencing a position.  Typically, this contract will limit the employee’s rights, including at the time of termination.  For more information regarding termination clauses, see our other blogs.

Employment contracts can also be an opportunity for employees to negotiate favourable terms for their employment.  It is possible that Mr. Gupta negotiated the terms of his compensation including the payment should he resign after one year of his term as President.

Constructive Dismissal

Neither UBC nor Mr. Gupta have reported why he resigned from his position. However, if an employee resigns due to a significant change in employment by the employer, or due to a poisoned work environment, the employee may be entitled to recover money for constructive dismissal after resignation.

A constructive dismissal occurs when an employer makes a unilateral and fundamental change to a term or condition of an employment contract without providing reasonable notice of that change to the employee.

Such action is an abandonment of the employment contract by the employer.  That means that an employee can treat the contract as wrongfully terminated and resign. This then gives rise to an obligation on the employer’s part to provide damages in lieu of reasonable notice.

Examples of Constructive Dismissal

Not every change in job responsibilities will be a constructive dismissal. However, a combination of reduced pay and a change in duties likely will. If the new position has less prestige or if an employee is moved from a supervisory to non-supervisory position constructive dismissal may have occurred. Reduction in compensation such as the elimination of a negotiated bonus or commission arrangement has also been considered constructive dismissal where the bonus/commission was a significant part of the employee’s compensation. 

The courts have considered significant changes in hours or shifts to be constructive dismissal. For example, where there was an explicit agreement to have certain days off, and the employer schedules shifts contrary to that agreement.

A temporary layoff is generally considered a constructive dismissal.

If an employer creates, or allows to develop, a working environment that is hostile or embarrassing for an employee, it may be considered that the employer no longer intends to abide by the employment contract. This includes verbal abuse or unfounded accusations of an employee and failing to treat the employee with civility, decency, respect, and dignity. See here and here for further reading on harassment and violence at work.

In a recent Supreme Court of Canada decision, Potter v. New Brunswick Legal Aid Services Commission, 2015 SCC 10, the court concluded that an unpaid administrative suspension may be a significant change to employment and therefore constructive dismissal.

Whatever the change, it must be substantial. The courts will look at the specific facts of the employment position in order to determine whether the employee has been constructively dismissed. It is up to the employee to prove that the change was so significant that it amounted to a dismissal.

If you would like to speak with an employment lawyer who has knowledge about this area of law, please contact us at [email protected] or 647-633-9894.

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