Reasonable Notice of Resignation
Many people think an employee is required to provide two weeks notice of resignation by law. However, neither the Ontario government nor the Ontario courts have made this a legal requirement.
The Employment Standard Act does not require an employee to provide a minimum notice of resignation.
The Ontario courts generally require an employee to provide their employer with reasonable notice of resignation. If an employee fails to provide reasonable notice of resignation and the employer has incurred damages as a result, then the employer is able to seek these damages against the employee.
Normally, an employer will bring this kind of claim when an employee has resigned, started working for a competitor, and the employer is also suing the employee for breaching his fiduciary duties and/or his contractual non-solicitation obligations.
A Cautionary Tale: GasTOPS Ltd. v. Forsyth
In this case, the employer developed its technology largely through contracts with two clients. Four employees decided to resign and almost immediately started a competing business which targeted the employer’s customers. None of the software programs developed by the employer’s competitors at that time were as sophisticated or as extensive as the employer’s product line.
The Actions Commenced Against the Employees
The employer sued the employees for:
– Breach of Fiduciary Duty
– Misappropriation and unauthorized or unlawful use of confidential information
– Misappropriation and unauthorized or unlawful use of trade secrets
– Misappropriation of corporate opportunities
– Breach of confidence
– Breach of contract. The employer claimed that the employees failed to provide reasonable notice of resignation.
The employees argued that the two weeks notice of termination provided was reasonable. The trial judge disagreed and suggested the employees should have provided 10 to 12 months notice of resignation. The Ontario Court of Appeal did not have to decide this issue but did state: “we should not be taken to agree with the 10-12 months suggested by the trial judge or the factors he considered in reaching that period.” This suggests to us that the Court of Appeal believed that the 10 to 12 months notice requirement suggested by the judge was too long in this case.
The employees were ordered to pay the employer over $12,000,000 in damages plus over $4,000,000 in legal costs. The trial took 295 days. Stay tuned to find out whether this case is appealed to the Supreme Court of Canada.
Lessons to be Learned
- An employee may be required to provide an employer with considerably more than two weeks notice of resignation.
- An employer must prove that the employee’s failure to provide notice of resignation has caused damages.
- An employer and an employee can agree on a specific notice of resignation period in an employment contract and thereby agree on what is “reasonable” notice of resignation.
If you have any questions about an employer’s obligations to a terminated employee, please call us at 1–888-640-1728 or email us at [email protected]
In the recent decision of Andros v Colliers Macaulay Nicolls Inc., the Ontario Court of Appeal (“OCA”) found yet another termination clause to be unenforceable. In this decision, the OCA reaffirmed and clarified various principles surrounding the enforceability of such clauses.
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