Howard Levitt: The flipside of wrongful dismissal is wrongful resignation — and it can cost employees

Employees should provide enough lead time for their replacement to be found, or they could get dinged

Article content

Howard Levitt and Rob Lilly

An employee, disenchanted with her job, decides it is time to part ways. She pens a touching resignation letter, hands it to her boss and leaves after two weeks’ notice. Case closed right? Perhaps. Now consider that she was integral to the business, left critical projects unfinished, client relationships hanging and colleagues working overtime to address the fallout. Does the employer have any recourse? Enter the world of wrongful resignation where employers, not employees, sue for insufficient notice.

Advertisement 2

Article content

Article content

Most readers are familiar with its better-known counterpart — wrongful dismissal — where an employer fires an employee without providing the requisite notice or adequate financial safety net for the employee to find another role. Just as wrongful dismissal can lead to damages for the terminated employee, wrongful resignation can lead to damages for employers left in the lurch by an abrupt departure. As it happens, oftentimes an employee resigning to claim constructive dismissal have no such case. But the employer has a great case for wrongful resignation. That is where, to date, most wrongful resignation cases come from — counterclaims in constructive dismissal actions.

Contrary to popular belief, the old adage of an employee giving two weeks’ notice before moving on to greener pastures is not universally acceptable in Canada. How much notice of resignation must an employee provide? Like most legal questions, it depends. The answer stems from three sources: (1) employment standards legislation, (2) employment contracts, and (3) terms implied by our courts.

Article content

Advertisement 3

Article content

Some provinces have legislated the minimum amount of notice required, whereas others have not. All of the Prairie provinces and the Maritimes have done so, except News Brunswick. The minimums range from one to six weeks depending on the employee’s length of service with two weeks as the norm. British Columbia has not and Ontario’s two week minimum only applies in rare circumstances such as a mass termination. But, like minimum employment standards termination and severance pay, it matters little. The real amount is invariably more.

Employers can contract for longer resignation periods than those set by governments. Knowledge transfer, project completion, client relationships, risk mitigation and finding a replacement all scream for a longer transition period. Employees who agree to such terms are legally bound by them. For example, in BlackBerry Limited v. Sebastien Marineau-Mes, the Ontario Superior Court of Justice upheld a six-month resignation period for a senior vice-president who unsuccessfully argued two months’ notice was reasonable despite agreeing to six months in his contract.

Advertisement 4

Article content

Absent a contractual clause, courts have considered the amount of notice required. As a rule of thumb, the more integral and senior the employee, the more notice required. Like wrongful dismissal awards, the periods vary based on the facts of each case.

Three employees resigned in Sure-Grip Fasteners Ltd. v. Allgrade Bolt & Chain Inc. — a general manager and two salespeople. The Ontario Divisional Court held the general manager ought to have given six months’ notice, whereas the salespeople only 1.25 months.

A salesperson making $180,000 with 10 years of service and responsible for 60 per cent of the employer’s sales ought to have given two months’ notice instead of the two weeks he provided, the Ontario Superior Court of Justice Court ruled in Gagnon & Associates Inc. v. Barry Jesso et al.

The Supreme Court of Canada agreed that a mere 2.5-weeks’ notice was required by a group of investment advisors who left Royal Bank of Canada to join its competitor Merrill Lynch in RBC Dominion Securities Inc. v. Merrill Lynch Canada Inc.

One month was required for an estimator with five years of service, the British Columbia Court of Appeal found in Consbec Inc. v. Peter Walker.

Advertisement 5

Article content

The Ontario Court of Appeal upheld the trial judge’s finding that a utility division manager with 18 months of service owed three months’ notice to his employer in Gary Bradley v. Carleton Electric Ltd.

Evidently, the analysis is more of an art than a science with longer notice required by managerial employees.

What damages can an employer seek when an employee abruptly jumps ship? The employer must suffer more than mere inconvenience. And, damages must flow from the chaos caused by the sudden resignation, not the resignation itself. Tangible losses must outweigh what the employer saves on the employee’s wages. Expenses inevitably arising from the resignation — such as ordinary recruitment and training — are not recoverable. But, if, for example, a recruiter is required for an immediate replacement, the standard two-months’ salary charged by the recruiter is compensable. Overtime paid to employees to deal with the aftermath is also fair game. As are loss of profits, project delays and operational disruptions — amounting potentially to a consideration financial burden for a departing employee.

Advertisement 6

Article content

For employees, avoid the financial consequences of a wrongful resignation lawsuit by providing enough lead time for the employer to find your replacement, which could very well be more than the minimum time required in your province or territory. Review your contract. If your contract is silent on notice, consider your role and the current labour market. The more integral you are to the company and harder you are to replace, the more notice required. The real test is the length of time it should take the employer to recruit a replacement.

Recommended from Editorial

And don’t make the rookie error as an employer of receiving a resignation on two weeks notice, tell the employee to leave immediately and then later when you get sued, take the position that the employee should have provided several months notice, not merely two weeks.

For employers, avoid navigating the murky waters of resignation periods and scrambling to find replacements by including a fixed number of weeks or months in your employment contracts. Consider the nature and importance of the employee’s position, the period required for a smooth transition, the time needed to find a reliable replacement and the standard in your industry. Employees are less likely to leave you holding the bag with such a clause. If the employee breaches the term, you have legal recourse. And if you are sued for constructive dismissal following an abrupt resignation, consider a counterclaim for wrongful resignation especially if the employee’s claim lacks merit.

Howard Levitt is senior partner of Levitt Sheikh, employment and labour lawyers with offices in Toronto and Hamilton. He practices employment law in eight provinces and is the author of six books including the Law of Dismissal in Canada. Rob Lilly is a partner at Levitt Sheikh.

Article content