It is well known that an employer cannot lawfully dismiss an employee without providing them with reasonable notice of their dismissal. Employers often find themselves required to give long periods of notice. Employees, on the other hand, are often only required to provide a couple weeks of notice of their resignation. However, that may not suffice if the employee is a senior employee, who plays a critical role in the employer’s organization. In a recent Ontario decision, four employees found themselves liable to their former employer for $11.4 million in damages after resigning on two weeks notice and setting up a competing business.
The four employees were senior program managers with a marine and aviation engine maintenance company. Two resigned from their employment on October 7, 1996, to be effective October 18, 1996. The others resigned on October 10, 1996 to be effective October 23 and 25. The resignation letters for the first two employees were identical, and stated that their future plans were uncertain but their employer could rest assured they would not solicit its clients or employees, or make use of its confidential information. They also stated that the employees would be happy to assist their employer in finding candidates to fill their roles.
On October 15, 1996 the first two employees incorporated a company to compete with their former employer. On October 22, 1996 the other two joined the new company. In addition to setting up the competing business, the employees used their former employer’s confidential information to solicit business from its customers. Twelve other employees soon resigned and joined the new company.
The employer sued the four former employees for breach of fiduciary duty and breach of contract, on the basis it was an implied term of their employment contracts that they would provide reasonable notice of their resignations.
The Court found that the employees did breach their employment contracts by not providing their employer with reasonable notice of their resignations. The Court emphasized that the purpose of notice is to provide the employer with the opportunity to hire or train a replacement for the departing employee, and that this employer did not have that opportunity, particularly in light of the twelve other employees departing. The Court also commented that the time required to hire or train a new employee depends on the nature of the business and the employee’s position.
Assessing the circumstances involving these employees, the Court found that ten months notice would have been appropriate, due to their technical expertise and direct competition with their employer. The Court also noted that the fact that their resignation letters included offers to assist their former employer in the transition period showed that they understood they were not providing sufficient notice for the training and hiring of replacements.
Employees often understand that their employer owes them an obligation to provide reasonable notice of termination. However, an employee’s own obligations on resignation are often overlooked. This case is a strong reminder that employees owe a corresponding duty to provide their employer with proper notice of their resignation, and that the obligation may be lengthy if an employee is senior or has expertise that is difficult to replace.