Korpan Tractor and Parts (Parriwi Management Inc.) v Denton, 2026 SKCA 44, addresses four principles of interest in employment law: (1) the test for determining whether an employee has resigned, (2) the test for abandonment of employment, particularly in the context of medical leave, (3) the application of the duty to mitigate where an employee is too ill to seek alternate work, and (4) the analytical framework for determining whether disability benefits must be deducted from a wrongful dismissal damages award.
Denton is a Saskatchewan Court of Appeal decision and is therefore persuasive, but not binding, in Alberta. Employment law is different in each province. Bow River Law is an Alberta firm with our blog focusing on Alberta cases, but we include some appellate (appeal-level) cases from other provinces where we think the Court’s treatment of issues is interesting or consistent with general common law principles applicable in Alberta.
For the purpose of brevity, this post will focus on the issues of resignation, mitigation, and the deductibility of disability payments.
Facts
The following is a summary of the key facts:
- Denton had been employed with Korpan Tractor since 1996 and had worked his way up to service manager by 2015, earning approximately $177,725 per year in total compensation at the time of his departure.
- On July 15, 2020, Denton attended a meeting with two owner-directors and other staff to discuss cost overruns. The meeting became heated. When a colleague abruptly said “I’m done” and walked out, Denton followed, saying “I am also done” as he left.
- Denton returned to his office, where one of the owners joined him shortly after, apologized for the conduct in the meeting, and encouraged him not to throw away his career. Denton testified that he verbally rescinded his resignation during that conversation. The owner could not recall those words being spoken but acknowledged that both parties understood the status quo would continue.
- The day after the meeting, the owners held a staff meeting and told assembled employees that Denton had not resigned, that he needed time off for health reasons, and that he was expected to return. In the weeks that followed, the owners exchanged text messages with Denton that the trial judge found were consistent with his status as a continuing employee.
- Denton claimed short-term disability benefits under the company’s group insurance plan, which one of the owners signed off on. He also requested and received vacation pay from the employer. When short-term benefits expired, Denton applied for long-term disability benefits, which the insurer denied after Korpan Tractor’s personnel refused to support the application. Denton commenced an action against the insurer and eventually settled that claim in late 2023 for $25,000, approximately three years after his termination.
- Four months after the July 15 meeting, Korpan Tractor sent Denton a letter stating that it had accepted his verbal resignation, identified July 15, 2020 as his last day of work, and requested the return of company property.
- Evidence before the trial judge established that, after his departure, Denton was suffering from severe depression, at times leaving him unable to get out of bed and requiring daily monitoring by his wife and others. He also underwent significant back surgery and required three separate operations to remove a tumour located between his right ear and brain. The trial judge found that Denton had not worked since July 15, 2020 and was unfit to work.
Analysis/Conclusion
Resignation
The Court considered two principles relevant to resignation: the appropriate test for determining whether an employee has resigned, and the considerations relevant to rescinding a resignation. On the first point, the SKCA found that resignation requires satisfaction of both a subjective and objective test. Subjectively, the employee must genuinely intend to sever the employment relationship. Objectively, a reasonable person in the employer’s position must have understood the employee’s words and conduct as reflecting that intention. A resignation must be clear and unequivocal, and the employer bears the onus of establishing it with clear and unambiguous evidence.
On rescission, the law permits an employee to retract a resignation before the employer has relied on it. The Court found that, even if Denton’s words in the heat of the meeting could be characterized as a resignation, the employer’s own conduct in the immediate aftermath was inconsistent with the argument that it had been accepted: one owner encouraged Denton not to throw away his career, the owners told staff the next day that Denton was on medical leave and expected to return, and text messages in the weeks that followed confirmed his ongoing employee status. One owner admitted during questioning that Denton was still considered an employee right up until the November 2020 letter.
Since it was not a resignation, it was a wrongful dismissal and the employee was awarded 24 months’ severance pay (reasonable notice).
Mitigation
The Court’s decision reiterates the burden of the employer, when arguing mitigation, to show that the employee failed to make reasonable efforts to find comparable work that was actually available to them, and that the employee would have secured the work had they applied. Here, Korpan Tractor lead no evidence of comparable positions that were available, relying on third-hand office gossip about one other employer that allegedly considered Mr. Denton to be a desirable employee.
The impact of Denton’s health on his ability to mitigate was a substantial part of the Court’s consideration. It found that, where an employee’s health prevents them from seeking or performing work during the notice period, the mitigation defence is weakened or defeated entirely. The trial judge found Denton was unfit to work from July 15, 2020 onward, a finding the Court of Appeal declined to disturb.
Disability Benefit Deductions
At issue was whether the settlement reached between Denton and the insurer for $25,000 should have been deducted from Denton’s wrongful dismissal damages at trial. The court considered the decisions of Sylvester v British Columbia, 1997 CanLII 353 [1997] 2 SCR 315, and Waterman v IBM Canada Limited, 2013 SCC 70.
Sylvester found that employer-funded disability benefits paid as a substitute for salary during the notice period are generally deductible, while noting that the intention of the parties as reflected in the employment contract remains the central consideration. In Waterman, the SCC held that a collateral benefit received by a dismissed employee is deductible from a wrongful dismissal award where it is sufficiently connected to the employer’s breach, either because the benefit would not have been received but for the wrongful dismissal, or because it was intended to indemnify the same type of loss caused by the breach. However, recognized exceptions exist where the employee has contributed, directly or indirectly, to the benefit plan, or where the benefit was not intended to function as a salary replacement.
The Court declined to deduct the $25,000 insurance settlement from the wrongful dismissal damages on two grounds. First, there was simply insufficient evidence of what the settlement actually covered. The release provided no clarity on whether the amount was intended to compensate for lost income, legal fees, or was a nuisance payment, and without that foundation Korpan Tractor could not establish the necessary link between the settlement and its own breach. Second, the settlement was executed in late 2023, approximately three years after the notice period had commenced, placing it well outside the period to which any deduction analysis would ordinarily apply.
My Take
The Court’s treatment of resignation reinforces an important principle: an employer asserting that an employee resigned bears the burden of proving it with clear and unambiguous evidence. This aligns with the broader theme running through employment law that employees are a vulnerable group entitled to significant protections, and that the law should guard against employees being held to words spoken in the heat of the moment that do not reflect a genuine, considered intention to leave. Just as an employer must meet a high threshold to establish just cause for dismissal, so too must it establish an unequivocal resignation before it can avoid liability. Employers who fail to treat the aftermath of a heated exchange with care, and whose own conduct is inconsistent with having accepted a resignation, will find it very difficult to advance that argument successfully at trial.
The Court’s findings on mitigation are a further reminder of how difficult it is for employers to succeed on this issue. The burden requires more than pointing to the fact that an employee did not apply for jobs. The employer must lead actual evidence that comparable positions were available and that the employee would have secured one had they applied. Where an employee is ill and genuinely unable to work during the notice period, that obligation is effectively suspended.
The disability benefit analysis is one that arises frequently in disputes. Denton is a useful reminder that deductibility is not automatic. The fact that an employee received disability benefits during or around the notice period does not by itself entitle the employer to a reduction in damages. The analysis requires a careful examination of the contractual intention of the parties through the terms of the disability plan and the employment contract. Relevant considerations include whether the employee contributed to the plan, whether the benefits were designed as a salary replacement for the specific type of loss at issue, and whether the settlement or benefit payment is actually connected to the employer’s breach.
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