Employees sometimes return to a former employer after resigning to accept new employment. When there is a very long gap in service, the rehiring employer will often treat the returning employee as a new employee for all purposes, including calculating severance. A recent case from Saskatchewan, Hetherington v. Saskatchewan Liquor and Gaming Authority, 2020 SKQB 110, reminds employers that courts will consider a variety of factors in deciding what impact a break in service will have on length of service for calculating common law termination entitlements.
An employee with the government of Saskatchewan was terminated without cause after her position was eliminated. The employee worked for the government for 28 years in total but had a two year gap in service when she left to work for another employer. At the time of her termination, she was offered a severance package based solely on her most recent, uninterrupted years of service with the government.
The employee sued and asked the court for a severance package based on her entire 28 years of service to the employer.
The key issue was what impact the employee's break in service should have on length of service for calculating reasonable notice of termination.
The judge explained that some courts have decided that a rehired employee is a new employee where there is no express agreement to recognize prior service. Others have considered a number of different factors to decide if prior service should be credited. These factors include:
- Whether the employee was enticed to return to the original employer;
- The level of remuneration given to a returning employee (i.e., did the employee receive the same or similar level of remuneration which they were receiving when they initially departed);
- Vacation entitlements and pension entitlements upon the employee's return;
- Any long-service recognition; and
- The length of the hiatus in employment as compared to the total years of service.
In this case, the judge decided that all 28 years of service should be included to calculate the employee's reasonable notice period. The judge considered the following:
- The employment agreement was not determinative. It did not state that the Plaintiff would be credited for prior service;
- The Plaintiff voluntarily left her position in 2005, and she was not induced to return;
- The government recognized her previous experience to set salary at the top of the range for the position;
- The government calculated vacation entitlement based on her previous service and the employee resumed her membership in the employer's pension plan based on her previous contributions;
- The employee received a letter from the Premier recognizing her years of service, which included her prior years of employment; and
- The 29 month break in service was relatively short when compared to 28 years of service.
This case was decided in Saskatchewan but is relevant for most employers because a similar approach to this issue is taken across Canada. The case is an important reminder that courts will consider a variety of factors in assessing the impact of a break in employment on length of service for calculating common law reasonable notice period. Employers rehiring former employers should consider all the various ways that they are recognizing past service and implement a termination provision to limit any termination entitlements based on total service.
If you need advice about or assistance drafting an employment agreement for a returning employee, please contact the author or your regular Fasken lawyer.