Yes, you can resign while on sick leave in Ontario. However, doing so can significantly affect your legal rights, including your entitlement to severance pay. In many cases, employees are better off not resigning and instead allowing the employment relationship to end in another way, particularly where frustration of contract may apply.
Why Resigning While on Sick Leave Can Be a Mistake
In many situations, employees choose to resign when they are no longer able to work due to illness or injury. However, this can be a costly decision. Employees who resign may give up their right to severance pay, while employees whose employment ends due to frustration of contract may still be entitled to compensation under Ontario law.
While every situation is different, it is important to understand your legal position before making a decision to resign.
What Is Frustration of Contract?
While most employment relationships end through resignation or termination, there is a third possibility: frustration of contract.
Frustration of contract occurs when an employment relationship can no longer continue due to circumstances beyond the control of either party. In the context of sick leave, this may arise where there is clear medical evidence that the employee will not be able to return to work in the foreseeable future.
Where frustration of contract is established due to illness or injury, employees may still be entitled to minimum notice and severance pay under the Employment Standards Act, 2000.
Can You Give Notice While on Sick Leave?
Yes, you can give notice while on sick leave. However, giving notice has the same legal effect as resigning; it ends the employment relationship on your own terms.
Before providing notice, it is important to consider whether you may have other options available, including potential entitlement to severance pay if your employment ends in a different way.
What Happens to Sick Leave When You Resign?
Sick leave itself does not typically continue after resignation. Once you resign, your employment relationship ends, and your access to employer-provided sick leave benefits will usually stop.
Depending on your situation, you may have access to other benefits such as short-term disability or long-term disability coverage, but this will depend on your employer’s policies and your eligibility.
Do You Get Paid Sick Leave When You Quit?
In Ontario, unused sick leave is not typically paid out when you resign, unless your employment contract or workplace policy specifically provides for it.
However, this is separate from severance pay or termination pay, which may be available in certain circumstances if your employment ends without you resigning.
When Does Frustration of Contract Apply?
Frustration of contract may apply where an employee is unable to return to work due to illness or injury, and there is no reasonable likelihood of returning in the foreseeable future.
In the case of Estate of D. v. Dick Engineering Inc., the Court found that an employee’s contract had been frustrated before his death due to the severity of his illness and the lack of a realistic chance of returning to work. As a result, his estate was entitled to termination pay and severance pay under the Employment Standards Act.
Should You Resign While on Sick Leave?
In most cases, employees should be cautious about resigning while on sick leave without first understanding their legal rights.
Resigning may limit or eliminate your ability to claim severance pay. In contrast, if your employment ends due to frustration of contract or termination, you may still be entitled to compensation.
Speak With an Employment Lawyer Before Making a Decision
If an illness or injury is preventing you from working, you may still be entitled to termination pay or severance. Speaking with an employment lawyer before making any decisions — including resigning — can help you understand your options.
Monkhouse Law Employment Lawyers offers a free 30-minute phone consultation to help you assess your situation.