Labor & Employment Law

Suing your Employer While Still Employed

By Michael Fitzgibbon

I can't imagine a more difficult decision for an employee than suing your employer while you're still employed. As you'd expect, it rarely happens.  That said, it happens.  What's the effect of launching the lawsuit on the employment relationship?  Is it just cause for summary dismissal?  The cases are mixed so the answer is "it depends".

The issue was recently considered by the British Columbia Court of Appeal in Lewis v. Terrace Tourism Society. The case highlights the different approaches to the issue as the majority and dissenting judgments demonstrates.  

Mr. Justice Frankel, in dissent, put the issue as follows:

Ms. Lewis submits that the summary trial judge erred in finding that she had repudiated her contract of employment by initiating her small claims action.  In support of her argument, she refers to authorities which hold that not every action commenced by an employee against an employer will amount to repudiation of a contract of employment.  That proposition is non-contentious:  Zaraweh v. Hermon, Bunbury & Oke, 2001 BCCA 524 (CanLII), 2001 BCCA 524, 94 B.C.L.R. (3d) 223 at paras. 21, 22.  However, commencing an action will constitute repudiation by the employee when doing so is incompatible with the employee?s continued employment.  Such is the case when, as here, an employee alleges that the employer has already wrongfully terminated the contract of employment:  Suleman v. B.C. Research Council 1990 CanLII 746 (BC C.A.), (1990), 52 B.C.L.R. (2d) 138 at 144 (C.A.); Podas v. Pacific Press Ltd. 1991 CanLII 1955 (BC C.A.), (1991), 61 B.C.L.R. (2d) 196 at paras. 9-12 (C.A.).

Mr. Justice Frankel would have held that the commencement of the lawsuit, in the circumstances of this case, amounted to just cause.  In his view, there had been no prior repudiation by the employer and, as such, the commencement of the lawsuit was incompatible with the employment relationship and, therefore, cause for dismissal.  

The majority, whose decision was written by Madam Justice Levine, held that the employer constructively dismissed the employee and had repudiated the contract of employment.  Having regard to the authorities, the commencement of the lawsuit was not a repudiation of the contract.  For example, In Zaraweh the Court held that:

Absent a prior repudiation by the partnership 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. This result is consistent with the decision of our Court in Suleman v. B.C. Research Council 1990 CanLII 746 (BC C.A.), (1990), 52 B.C.L.R. (2d) 138 in which this Court held that commencement of the action amounted to repudiation of the contract of employment.

Notwithstanding that conclusion, Justice Levine went on to consider,  in obiter,, whether the commencement of the action repudiated the employment contract.  She held that:

If it could be said that the Society?s actions did not amount to repudiation of her employment contract, I would nonetheless find that she had not repudiated the employment contract by bringing her Small Claims action.

Madam Justice Levine then distinguished the earlier cases holding that:

In these circumstances, where all of the indicia of the employment relationship had ended with the employer?s cessation of business, it would constitute a ?trap for the unwary? to hold that an employee cannot sue to have a court declare her rights without risking a finding that she had, by doing so, repudiated whatever vestige of the employment contract might remain. 

There are divergent lines of cases on this issue and the particular facts of the case will, of course, determine the result.   

Full post as published by Thoughts from a Management Lawyer on July 17, 2010 (boomark / email).