Jun 6, 2016

Two weeks’ notice? Long-time employees may be required to give more to employers

Gagnon & Associates Inc. et. al. v Jesso et. al., 2016 ONSC 209 (CanLII)

A recent Ontario Superior Court case, Gagnon & Associates Inc. et. al. v Jesso et. al., is a reminder that both employers and employees are required to give reasonable notice of termination at the conclusion of an employment relationship.

Case background: employee planned to work for competitor

Barry Jesso was a senior salesman employed by Gagnon & Associates Inc. (“Gagnon”) a heating, ventilation and air conditioning business, owned by Pierre and Susan Gagnon. The employment relationship was not blissful. Jesso thought he wasn’t being paid enough, and Gagnon thought they were paying Jesso too much. While he was still employed by Gagnon, Jesso began making plans to transfer his sales business to HTS Engineering (“HTS”), who was a competitor of Gagnon. At that time, HTS was not operating in the sales territory Jesso serviced for Gagnon, and Jesso planned to help HTS expand into that territory. HTS liked that plan, and agreed to hire Jesso and another Gagnon employee to effect the proposed expansion.

On a Friday afternoon, Jesso and the other employee met with Pierre Gagnon and provided their letters of resignation, effective immediately. Jesso offered to work for a further two weeks, but that offer was conditional upon Gangon paying outstanding fees which Jesso claimed he was entitled to. Jesso also indicated that he would not accept new work during the two week period. Jesso’s resignation came as a surprise to Gagnon. Gagnon refused Jesso’s conditional offer to work for a further two weeks.

The parties commenced litigation. Jesso claimed he was entitled to both the outstanding fees and a share of the business, and that he was constructively dismissed. Gangon claimed that Jesso breached his duty of good faith, misused confidential information, and that he failed to give adequate notice of resignation. Ultimately, most of the claims were dismissed, although Jesso was successful on his claim for the outstanding fees of approximately $38,500. Gagnon successfully argued that Jesso failed to give adequate notice of resignation.

Length of reasonable resignation notice varies

It is a well-established principle that employees are obligated to give reasonable notice of termination of their employment to their employer. The court found that Jesso effectively gave no notice of his resignation. (The conditional offer to work for a further two weeks was not effective.)

In determining the amount of notice that Jesso ought to have given, the court considered the nature of Jesso’s position, and the time it would reasonably take Gagnon to replace Jesso, or otherwise take steps to adjust to the loss. Jesso was a salesperson with no managerial responsibilities, although he was a senior employee with 10 years’ service. Jesso was responsible for a significant portion of Gagnon’s sales, and the court accepted expert evidence that Jesso’s departure resulted in Gagnon’s sales not increasing by a forecasted 20% margin. The court also took into account Jesso’s knowledge that the other employee intended to resign simultaneously, compounding the negative impacts for Gagnon. Ultimately, the court found that Jesso ought to have given two months’ notice of his resignation. As damages, the court ordered Jesso to pay Gagnon the loss of sales that Gagnon suffered during the notice period, to the extent those sales were properly attributed to Jesso, which was about $35,000.

The length of notice that employees are required to give upon resignation will depend on the circumstances of each case. More senior employees or employees who are otherwise more difficult to replace will be required to provide more notice. Employers and employees should consider including terms dealing with notice of resignation into their employment contracts, which can provide certainty to both parties with respect to resignation of employment.