Employees May Be Required to Give Reasonable Notice of Resignation
By: Earl Altman, Employment Lawyer
In a decision rendered by the Ontario Superior Court of Justice
in September 2009, four employees were found liable for damages
for wrongful quitting.
In this case, the four defendants were all senior employees working
for GasStops Limited. GasStops was a company that provided maintenance
of gas turbine engines for boats and airplanes. All four of the
employees resigned within two weeks of each other. Following their
resignations, two of the defendants incorporated a new company.
A week later, the other two defendants commenced employment with
that company. Over the course of the next three months, a further
fifteen employees of the plaintiff company resigned from the company
and joined the defendants. The effect on the plaintiff company
was, obviously, disastrous.
The plaintiff sued the four former employees and their company
for damages for breach of fiduciary duty, breach of various other
duties not to compete or solicit, and breach of the obligation
to give reasonable notice of termination.
The trial judge determined that all four of the defendants were,
in fact, key employees of the plaintiff. They therefore owed the
plaintiff a fiduciary duty. A fiduciary duty is defined as a duty
to act in the best interests of another party. In this case, obviously,
it was the former employer’s positions that the former employees
owed it a duty to refrain from taking steps which would harm the
company.
In finding that all four of the employees were fiduciaries, the
trial judge relied on the leading case of Canada Aero Services
Limited v. O’Malley. In that case, the Supreme Court of Canada
held that an employee would be considered a fiduciary employee
where he has the scope to exercise some discretion or power over
the affairs of the company, and that the employee can unilaterally
exercise that power or discretion to affect the interests of the
company. The Court in Canadian Aero also held that the company
must be particularly vulnerable to the actions of the fiduciary.
Having found that the four employees were, in fact, fiduciaries,
the judge went on to conclude that, given the positions occupied
by these four individuals, they owed their employer a significant
amount of notice of their intention to leave. The judge looked
to the effect which the departure of these employees had on the
operations of GasStops and concluded that the employees owed GasStops
at least ten to twelve months notice. The judge based his conclusion
on the evidence presented by GasStops as to the reasonable amount
of time it would require to replace all four of these people in
the specialized industry in which they operated.
It no doubt affected the judge’s conclusions that he found
that all four of the defendants had actively solicited the existing
and perspective customers of GasStops with whom they had dealt
while in GasStops’ employ. In particular, the judge found
that the employees had used their former status as employees of
GasStops to attempt to induce the customers of GasStops to transfer
their business to the new entity. The judge found that it is clear
law that a fiduciary may not solicit the customers or perspective
customers of his former employer.
In crafting a remedy, the judge found that, given the length of
time that it has taken to get the case to trial, granting an injunction
at that stage would be of little use. Rather, the judge ordered
the defendants and their company to account to the plaintiff for
all profits earned as a result of the use of the confidential information
and breach of the fiduciary duties. He found this liability both
on the new company and on all of the individual defendants equally.
The judge therefore granted judgement against all of the defendants
jointly and severally in the sum of $11,401,571.
It should be pointed out that this was one of the longer employment
law trials, having lasted 295 days. There were close to 3,000 exhibits
tendered by the parties, and closing submissions exceeded 3,000
pages. It is for that reason that the decision itself ran close
to 700 pages.
If you have any questions regarding the information in this Newsletter,
please contact Earl Altman, or any of the other lawyers in our
office@ealtman@garfinkle.com
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