Employees Beware: Reasonable Notice is a Double-edged Sword

March 23rd, 2012 by

A recent Ontario Court of Appeal decision has endorsed the position of the Ontario Superior Court of Justice, that employees may owe their employee a significant amount of notice when planning to leave their employment. In the case of GasTOPS Ltd. v. Forsyth, four former employees of a company left their employment to start their own, competing business. Each of the four former employees provided the employer with two weeks notice, often considered to be a reasonable amount of time to offer when resigning from a job. However, given the importance of the roles that these employees played in the company they left, the trial judge held that they were integral to the direction and guidance of the company.

In upholding the trial judge’s decision, the Court of Appeal has reinforced the position that employees who are aware of their importance to the operations of their employer, and violate their responsibility to the employer by failing to provide adequate notice of resignation, may be financially liable to the resulting damage caused to their employer. In the GasTOPS case, the former employees, and their newly formed company, were found liable for damages to their former employer in the amount of over 12 million dollars, calculated as the amount of profits earned by the former employees through their newly formed company over a 10 year period. As well, an additional 3 million dollars in pre-judgment interest, and over 4 million dollars in legal costs, were awarded to the employer.

With regards to notice period, the trial judge noted the following:

“Failure of an employee to provide adequate notice will entitle the employer to an award of damages.  Generally, reasonable notice is meant to give the employer time to hire and train a replacement.  In determining the time required to hire and train a new employee, one must look at the nature of the employee’s position and the area of work that the employer was competing in.”

The Court of Appeal upheld the trial judge’s finding that the former employees had owed approximately 10 months notice to their former employer, given their roles and time spent with the company.

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