Ruling signals harsh judgment for company defectors

<p>Employees and employers make all kinds of wrong assumptions about thelaw. Seldom do their “perceived” rights exist. Often they rely on rulesthat have long been rejected by the courts and legal doctrines that arenow invalid. Sometimes they are just steered wrong by their lawyers. <br /></p>

 

Employees and employers make all kinds of wrong assumptions about the law. Seldom do their “perceived” rights exist. Often they rely on rules that have long been rejected by the courts and legal doctrines that are now invalid. Sometimes they are just steered wrong by their lawyers.

 

Employees and employers are most confused about the rights and obligations of departing employees. Key employees believe they can pack up and leave without notice and employers will assign the label of a “fiduciary” to junior employees, a title usually reserved for directors.

 

A recent Ontario case should be setting off alarms.

 

When a number of employees left Ottawa-based GasTOPS Ltd. to start a competing business, a few of them only provided two weeks’ notice of their resignations. The effect on GasTOPs’ business was catastrophic. The resignations were deliberately given just before an important business opportunity and in a few weeks, much of GasTOPS’ goodwill disappeared. GasTOPS sued the new company, claiming the employees took and then misused confidential information and trade secrets to acquire its customers. In addition, GasTOPS claimed that the employees had not given reasonable notice of their resignations.


When employment ends, there are various rights and obligations. Similar to a wrongful dismissal case, where an employer terminates an employee without sufficient notice, employees have a duty to provide appropriate notice to their employers when resigning. When key employees leave without a sufficient warning, they can be sued for a wrongful resignation.


Although employers rarely bother to sue ex-employees, the tables may be turned when a hasty resignation proves costly. Here, had the defectors provided sufficient notice of their resignations, they would not have been able to immediately establish their own company and compete with GasTOPS for important business opportunities during that notice period. The court found that the employees should have provided the employer with ten months’ notice of their resignations, which coincided with the period of time that it should have reasonably taken to hire and train replacements.


Employees who resign to compete with former employers should beware. If you possess specialized skills or are contemplating leaving your employer in a vulnerable situation, your duty to give advanced notice of your resignation is heightened. In assessing how much notice to provide, consider your employer’s ability to replace you and whether your employment contract gives any guidance.



– Daniel A. Lublin is an employment lawyer with the law firm Whitten & Lublin LLP. Reach him at dan@toronto-employmentlawyer.com

 
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