Give me a raise or else!

Employee pay raise ultimatum mistakenly results in a resignation
By Jeff Hopkins
|employmentlawtoday.com|Last Updated: 05/20/2014

A Nova Scotia employer's treatment of an employee's demand for a raise and threat to look for other work as a resignation was within its rights, the Nova Scotia Supreme Court has ruled.

In his affidavit, Gary Kerr swore that on June 3, 2013, he approached his supervisor at Valley Volkswagen in Coldbrook, N.S., Peter Benjamin, and explained that he required the assistance of a more competent person in the parts department of the dealership. During the discussion, Kerr also stated that he had not had a pay raise since he started working for Valley Volkswagen, and that if someone more reliable was not hired to help him, he "may have to pursue other options."

Three weeks later, Benjamin asked him what his plans were with respect to his future employment, to which Kerr responded that nothing had changed. The following day, Benjamin told Kerr that his continued employment was no longer an option, and that he was being dismissed effective immediately.

Valley Volkswagen’s version

In his affidavit, Benjamin swore that prior to May 2013, he advised Kerr that his performance as parts manager was substandard because of an excess in inventory, and that he needed to begin reducing the excess inventory as soon as possible.

Benjamin further swore that during a meeting on June 3, 2013, in which he repeated his concern regarding inventory, Kerr stated, "I want a $100 per week raise or I’m gone," and how he had another job opportunity that would pay him more money. He also said he intended to quit if he did not receive the raise. In response, Benjamin stated that he was not authorized to increase employees’ pay.

From June 3 to June 24, 2013, Kerr continued to attend work, and during this time did not take any steps to resolve the excess inventory issue. As a result, on June 24, Benjamin swore he and the owner determined that Valley Volkswagen had no choice but to accept Kerr’s resignation.

Resignation or termination

Valley Volkswagen acknowledged it did not have just cause to terminate Kerr’s employment, and its defence rested entirely on a finding that Kerr resigned or quit. Conversely, Kerr did not argue that he was constructively dismissed; his position was that he was terminated, or that he simply did not quit.

While the court reviewed a significant array of case law, the key decision in its review was Kieran v. Ingram Micro Inc., in which the court stated,

"A resignation must be clear and unequivocal. To be clear and unequivocal, the resignation must objectively reflect an intention to resign, or conduct evidencing such an intention … Whether words or actions equate to resignation must be determined contextually. The surrounding circumstances are relevant to determine whether a reasonable person, viewing the matter objectively, would have understood Mr. Kieran to have unequivocally resigned."

In this case, the court also reviewed case law which suggested that where an employee expresses dissatisfaction with an employer, or about a wrong committed by an employer (real or perceived), and declares an intention to seek other employment without words or actions indicative of an immediate intention to quit, she has not quit. Moreover, where the employee, in a state of depression, frustration or emotional angst makes a hasty statement that she is quitting and shortly thereafter, realizing the rashness of her statement or actions, either retracts the statement or attempts to patch up the dispute leading to the declaration of intent to quit, the employee has not quit.

On the question of reliability and credibility, when the affidavit evidence of Kerr varied from that of Benjamin, the court preferred the evidence of Benjamin. In that regard, the court found Kerr gave a clear and unequivocal ultimatum to Benjamin on June 3 to either give him a raise of $100 per week or he would quit. Kerr had also stated that he had another employment opportunity that would pay him more money. The court further found that management warned him that his performance was substandard due to the excess inventory and consideration of a pay raise depended on his performance. Moreover, during the following three weeks, Kerr did not withdraw his ultimatum and did not appear to take any steps to solve the inventory problem. Kerr’s June 3 threat to resign was made in clear and unambiguous terms.

The court's decision

In all the circumstances, the court concluded that a reasonable person would have understood that Kerr was serious in his intention to resign and accept another job opportunity that would pay him more, if he was not given the demanded raise.

In assessing the court’s decision in this case, there is the question of whether a resignation can truly be clear and unequivocal when there is no effective resignation or end date. Similar to the legal requirement for a termination of employment (without cause) to have occurred, the law typically requires not only a notice of termination to occur, but also a clear or effective termination or end date. In this case, when Kerr did not specify an effective resignation or end date, thereby leaving it wide open, it renders it difficult to find a clear and unequivocal resignation to have occurred, particularly when Kerr continued working for three weeks. It begs the question: how long could he have continued to work, yet Valley Volkswagen was still able to accept his resignation? In any event, one thing is quite clear: Kerr’s downfall was his over judging his value to his employer. Lastly, in circumstances where an employer objectively believes that an employee has resigned, and wishes to act on that resignation, whether for performance reasons or otherwise, this case certainly tells us that the employer should formally accept that resignation as soon as possible, before the employee is able to retract.

For more information see:

Kerr v. 2463103 Nova Scotia Ltd., 2014 CarswellNS 37 (N.S. S.C.).
Kieran v. Ingram Micro Inc., 2004 CarswellOnt 3117 (Ont. C.A.).

Jeff Hopkins is a partner with Grosman, Grosman & Gale LLP, practising all aspects of labour, employment and human resources law, with a particular focus on wrongful dismissal litigation, including constructive dismissal and human rights. He can be contacted at (416) 364-9599 or jhopkins@grosman.com.

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