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30 Second HR: 5 Things to Know about Bill 168
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The Implications of Rehiring an Employee
Many companies rehire employees who have worked for them in the past. Typically, they have a “Re-employment Policy” which details the privileges that will be re-instated (i.e. benefits, vacation, and seniority). However, they may not have considered the obligation regarding severance pay should the renewed relationship not work out.
The company is required to pay severance for broken periods of service when they add up to five (5) years or more (if severance is applicable). For example, if an employee had worked previously for the company for 2 years, resigned and was away for 2 years, rehired and worked for another 4 years and then the employee is terminated, he/she would be entitled to severance based on the combined service – therefore, 6 years (the 2 years previously employed plus the current 4 years of employment). Notice would just be required on the current employment period of 4 years (therefore, 4 weeks of working notice or pay). Under the Employment Standards Act, 2000 minimums, the total termination pay would be four (4) weeks of notice and six (6) weeks’ severance (if applicable). In addition, it doesn’t matter how long the break in service is or the reason the employee left initially (quit or termination). So rehiring an employee can mean taking on a potential severance liability.
Some suggestions when considering an employee for re-hire include:
- Insuring that the employee’s qualifications meet the requirements of the vacant position;
- Confirming that he/she had been in good standing at the time of departure;
- Reviewing the privileges you may consider reinstating (benefits, vacation, etc.) as there is no legal obligation to do so;
- Clearly outlining all terms in the new offer letter.
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Resignation vs. Termination Notice
Recently, a client contacted me with the following question:
“If an employee has provided 2 ½ months notice for resignation but we don’t require (or want) him here for more than two weeks – how do we handle it legally?”
The answer is that it depends on the employee’s service with the company but it is the lesser of the resignation notice or the termination pay that would be owed under the Employment Standards Act, 2000 minimums. For example, if the employee has 2 years of service, you would owe 2 weeks pay under Employment Standards (rather than 2 ½ months) because in essence you are terminating his employment (see section 56 subsection (1)(a) of the Act). However, if the employee has 10 years of service, you may be obligated to pay the 2 ½ months (or continue to have the employee work for this period of time). If severance is applicable, then the employee would be entitled to 8 weeks notice and 10 weeks of severance. Therefore, the 2 ½ months of resignation notice would be less. If severance is not applicable, then the employee would be entitled to 8 weeks notice only which would be less than the resignation notice of 2 ½ months. You would be terminating his employment and paying (or having him work) the 8 weeks of notice.
So, the next time you have an employee submit a resignation letter with a significant notice period, double check his/her service date!
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