Canada: Wrongful Resignation – Employer Wins Ontario Case

 

By now, we certainly all know what a wrongful termination is in the employment context. But how many of us have heard of a wrongful resignation?

The Superior Court of Ontario recently reminded us that employers are within their rights to bring a wrongful resignation claim against an employee who fails to provide the employer with reasonable notice of resignation.

In this case, the employee, after working his way up within the firm over a 10-year period, secured employment with a major competitor while he was still with his firm, in part because of unpaid commissions earned. In addition to this, he submitted his resignation effective on the same day – his last day of work, never to return again.

Because he had established a good rapport with the clients he worked with at his firm, many clients wanted to follow him and did so gladly. This made it impossible for his firm to (a) maintain the same or close to, the revenues he had produced for them, and (b) made it very difficult to find an experienced salesperson to replace him.

Consequently, the employer took him to court on the basis of:

  • failing to provide the firm with adequate notice of his resignation;
  • giving his firm no time to prepare a ‘transition plan’ due to ‘same day’ notice of resigning; and
  • employer’s lost sales due to employee’s withdrawal from the firm, in addition to their only other salesperson

The employee in question took the position that since he was not in a managerial role or a fiduciary employee of the firm, additional notice was therefore not required.

The Court, however, agreed with the employer, finding that the reasonable resignation period ought to have been two months, and also that the employee’s departure resulted in lost sales for the firm.

The Court awarded the employer with $35,164 representing the loss in sales suffered during the two-month period following the employee’s resignation.

Court notes included in this case were as follows:

  • The notice required of an employee will be a function of that employee’s position with the employer, and the time it would reasonably take the employer to replace the employee, or otherwise take steps to adjust to the loss 
  • Although this particular employee was a salesperson with no managerial responsibilities, he was also a senior employee with 10 years’ experience and knew he was responsible for a significant percentage of his firm’ sales.
  • The evidence at trial established that the market for experienced HVAC salespersons was certainly limited, and a replacement hire could not be made for a couple months after the employee’s departure.
  • In addition, this employee was well aware that the other senior salesperson would also be leaving the firm on the very same day! This put the firm in a challenging and difficult position. The court believed that these particular circumstances required a notice period of two months, which would have been deemed much more appropriate.

So, What’s the Message for Employers?

According to the Court, a reasonable resignation period relies on the employee’s position, tenure with the firm, and also the time it would reasonably take the employer to replace the employee, or otherwise take steps to adjust to the loss.

While the right to bring a wrongful resignation claim against a former employee is powerful protection for employer’s who have suffered a loss resulting from the employee’ inappropriate action, employers are considerably better off by:

  • taking a proactive approach, thereby circumventing such action by clearly stating the precise amount of notice required if and when an employee wishes to resign in all employment agreements, regardless of role level; and
  • being equally careful with the wording of their ‘non-competition agreement’, ensuring that the wording is not ‘too broad’ to be legally binding and supported.

 

Supporting Article Research Sources: Mondaq, CCPartners

 

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