By Howard Levitt
Leaving your employer in the lurch when you quit can leave you open to damages
On Monday, Justin Trudeau announced that he was resigning as Liberal Party leader and would step down as Prime Minister once the Liberals have selected a new leader. Trudeau’s resignation came amidst growing pressure from Liberal MPs eager to save their own electoral skin and on the heels of Chrystia Freeland’s own “resignation” from cabinet in December.
Many Canadians had been calling for Trudeau’s exit long before Monday’s announcement. While some have wanted him out for years, last year the scrutiny of his record in office intensified dramatically. But the prime minister ignored his critics, leaving many with the feeling that he hurt the country in prolonging his departure. Since he also prorogued Parliament until March 24, Canadians will likely be denied the option of an early election, for which many are clamouring.
The late timing of Trudeau’s resignation and its consequences for Canadians raises some issues covered by the employment law concept of wrongful resignation.
As in a dismissal, in which where an employer is required to provide an employee sufficient advance notice (or compensate them if they haven’t), a resigning employee is required to provide sufficient notice of resignation. Just as notice of termination provides an employee time to find new employment, the purpose of notice of resignation is to provide the employer sufficient time to find a replacement.
In Ontario, the Employment Standards Act does not provide an answer for how much notice of resignation is required — the law is that an employee must give “reasonable notice.” Often, an employee’s employment contract will state how much notice they are to give when resigning. In that case, if an employee does not provide the amount of notice required by the contract, they may be liable for breach of contract. If the employment contract does not stipulate how much resignation notice is required, “reasonable notice” can vary between industries and the nature of the job. In some industries such as construction, less notice of resignation is typically expected of employees. For employees in executive positions, more notice will typically be expected as these employees will take longer to replace.
When a departing employee fails to provide the required notice or reasonable notice of their resignation, it can harm their employer’s business. Employers can therefore sue former employees for wrongful resignation when it causes provable harm. To do so, an employer must prove that the employee’s insufficient notice of resignation caused the employer to suffer losses. Many employers often do not sue given the difficulty in proving these losses. Courts have required employers to show that the employee resigned voluntarily, that no cause for the resignation existed (such as a demotion), and that the employee failed to provide reasonable notice. An employer also must try and replace the employee to mitigate the damages caused by their resignation.
Employers cannot recover losses that the business would have incurred anyways, even if the resigning employee had given reasonable notice. An employer must show that a loss was directly caused by the employee’s insufficient notice of resignation. An example of a loss that would have occurred anyways, making it unrecoverable, is the cost of hiring a replacement. Losses suffered by an employer can also be set-off against the savings the employer receives from not having to pay the employee during the resignation notice period. There are thus several difficulties employers face in proving their losses when litigating wrongful resignations. An example of easily provable losses are sales the employee would have made which could not be replaced so quickly.
Before suing, employers should think about what losses they have truly suffered from an employee’s insufficient notice of resignation, whether that loss would have occurred anyways, and whether the loss outweighs the savings in wages. Employees should always check their employment contracts to see how much notice they must give, and also take steps to avoid conflict and harm to their employer when they resign.
For employees who do not have a contractual resignation notice obligation, they should talk to their employer about their resignation and what is “reasonable notice” in their situation. This way, both parties can ensure that the employee is not leaving at a time where their departure would cause the business particular harm or difficulty, such as during a busy period or a significant company transaction.
Sometimes a wrongful resignation action can become a counterclaim against an employee who reisgns on the spot on the basis that they were constructively dismissed insofar as, to sue for constructive dismissal, an employee must leave fairly quickly after the demotion or other change in order to avoid a court finding that they had accepted it.
Trudeau’s departure reminds us of the perils of resigning at the wrong time or in the wrong way. In the employment context, a resigning employee should be aware of their contractual obligations and have an open dialogue with their employer to ensure a smooth exit.