In a recent decision of the Supreme Court of British Columbia,[1] the court held an employee’s decision to sue her employer for wrongful dismissal during the working notice period repudiated the employment agreement. This allowed her employer to treat the employment as ended, saving the employer roughly $150,000 in wrongful dismissal damages.
What is repudiation?
Repudiation arises when a party to an agreement indicates through words or actions that they do not intend to remain bound by the agreement. In the context of an employment agreement, this usually involves a significant breach of a core term that cuts to the heart of the relationship.
The test is objective – how would a reasonable person interpret the repudiating party’s actions – not what the repudiating party may have subjectively intended.
Repudiation gives the non-breaching party (in this case the employer) the option to treat the agreement as ended. This is important because, as we see in this BC decision, repudiation significantly reduced the amount of wrongful dismissal damages the employer would otherwise have owed the employee.
What happened in the BC case?
The facts were essentially not in dispute:
- Larraine Adrain worked for Agricom for approximately three decades.
- Agricom’s owner was contemplating retirement and offered to sell the business to Adrain for one dollar. If Adrain was not interested in purchasing the business, Agricom would wrap up operations. Adrain did not wish to purchase the business and Agricom provided her with 13 months’ working notice. Agricom continued to pay Adrain for 4.5 months after giving her notice of termination.
- Roughly six weeks into the working notice, Adrain sent a demand letter for 24 months’ notice (~ $200,000).
- The parties could not reach agreement and Adrain sued Agricom for wrongful dismissal. At the time, Adrain was still working through her notice period.
- Agricom took the position that Adrain’s lawsuit was both a repudiatory breach and just cause for dismissal.
The trial
At trial, the parties agreed Adrain was entitled to 24 months’ notice. However, the court awarded only seven months’ notice, primarily on account of Adrain’s repudiation of the agreement. How did the court get there?
Did Adrain’s lawsuit = just cause?
No. Suing an employer is not automatically just cause. However, just cause may exist if a lawsuit fundamentally and irreparably damages the employment relationship.
According to the court, sending two demand letters and filinga lawsuit did not irreparably damage the employment relationship because it was not objectively reasonable for Agricom to be shocked by the letters or claim, and “the pleading itself is brief and relatively straightforward [and] does not contain any scandalous or inflammatory allegations.”
Had Adrain repudiated the employment agreement?
Yes. Even though Agricom did not have just cause to terminate Adrain’s employment, the timing of Adrain’s lawsuit was significant because in British Columbia suing one’s employer for wrongful dismissal, while continuing to work for the employer, repudiates the employment agreement.
13-month notice was insufficient; therefore wrongful dismissal
The court’s ruling that Adrain repudiated the employment agreement did not foreclose the possibility that Agricom had wrongfully dismissed Adrain prior to the repudiation, by providing insufficient notice of dismissal. At trial, Agricom conceded Adrain was entitled to 24 months’ notice. However, Agricom had provided only 13 months’ notice, thus the court found Adrain had been wrongfully dismissed prior to the repudiation.
Award reduced to seven months
Starting at 24 months’ reasonable notice, the court deducted 11.5 months for the unworked portion of the 13-month working notice due to Adrain’s repudiation, and a further 4.5 months for the period Agricom continued to pay Adrain after giving her notice (plus another month for contingency).
Takeaways for employers
First and foremost, the law of repudiation is not uniformly applied across Canada. The Court of Appeal for Ontario has held that “commencing legal action can, but does not necessarily, constitute repudiation” because the proper inquiry is “whether the party bringing legal action evinces an intention, in all the circumstances, to repudiate the agreement.”[2] The Supreme Court of Nova Scotia has described the central question as “ has the filing of the action given rise to a breakdown in the employment relationship to the extent that continued employment has become untenable?”[3] The Supreme Court of Canada has indicated that commencing a legal action might not render the employment relationship untenable.[4]
Despite these differing approaches, this decision offers three important reminders for employers:
- An employee who sues their employer, while still employed, may have repudiated the employment agreement. The test is objective, the analysis is contextual, and the question is whether the employee’s conduct demonstrates an intention not to be bound by the agreement.
- If there is repudiation, an employer’s swift action to accept it may result in a significant reduction in wrongful dismissal damages.
- In some cases, suing an employer while employed will be just cause. The test is contextual and the question is whether the lawsuit fundamentally and irreparably damaged the employment relationship such that it could not reasonably continue.
Bottom line: The waters are murky and even experienced human resources professionals can get this wrong. Best practice is to seek the assistance of skilled employment counsel who can spot the issues and help minimize potential exposure before, during and after dismissal.
To learn more or for assistance, contact your Sherrard Kuzz LLP lawyer or info@sherrardkuzz.com.
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[1] Adrain v Agricom International Inc., 2025 BCSC 1842.
[2] Remedy Drug Store Co. Inc. v Farnham, 2015 ONCA 576 at para 58. [emphasis added]
[3] Garner v Bank of Nova Scotia, 2015 NSSC 122 at para 195. [emphasis added]
[4] Potter v New Brunswick Legal Aid Services Commission, 2015 SCC 10 at paras 108-111.
