Resignation & Notice Periods: What is Required? THE BASICS Many readers will be surprised to learn that the obligation to give notice of termination of employment is two-sided. The requirement that an employer give advance notice to an employee is well known. Just as the company is obliged by law to do so, the employee has the same legal obligation when resigning from a job. This is not as well known or understood. The damage claim an employer may make against an employee who fails to give proper notice is considerable. Take, for example, an extreme situation to illustrate the principle. A senior marketing vice-president of a large company is in the middle of presenting a bid for a major contract in a competitive market. The contest is down to two finalists. His presence is critical to the success of the bid. He resigns abruptly prior to the final presentation, and his company loses the bid. The employer may well successfully argue that the sudden departure of its key executive led to the loss of this opportunity. Its damage claim may well be the potential increase in profits associated with this contract. The amount of notice required will vary with the situation. In a case such as the one described above, the employee’s notice obligation may be as much as six months. In real life, this type of claim is rare. When it is made, it is usually accompanied by allegations of stealing trade secrets or similar breaches of confidence. Nonetheless, such a claim is indeed possible and both sides must be aware of this issue. CONTRACTUAL TERM Just as an employment contract may set out the terms with respect to termination in advance, a contract can also include a term dictating the notice required upon resignation. Such a term could even stipulate the expected damage claim the employer may suffer where there has been a violation, as long as it is reasonable. This may be appropriate where the employer commits to an expensive period of intensive training for the new hire and wants an assurance, in turn, from the employee that they will remain employed for a certain time period to rationalize this expense. The term may even include some form of compensation for the training where there has been a breach. UNILATERAL RESIGNATION Generally, when an employee delivers a voluntary resignation that is in turn accepted by the employer, a contract is made in which both parties have agreed to the notice period provided. There can be exceptions to this general rule as occurred in one recent case, English v. Manulife Financial Corporation. In this instance, the employee retracted their resignation which was refused by the employer. The Court of Appeal found that the employer had not closed the door to the employee rescinding her resignation and was clearly sympathetic to the employee’s mistaken decision to resign. TAKEAWAYS FOR EMPLOYEES AND EMPLOYERS The issue of how much notice is required upon resignation is determined based on the context of the situation. Courts will examine how vulnerable the employer was to damages arising from a sudden resignation, and how much time would be required to locate and train a suitable replacement. It is not a mathematical formula that can be applied the same way across the board. Generally speaking, most companies will not demand a long advance period of working notice. Often, the best course of action for an employee looking to resign on good terms is to negotiate a reasonable notice period with their employer. Once the two parties agree to the period of working notice, an agreement has then been made. Should the employee break this contract, then there could be a damage claim asserted by the company for its proven consequential losses. If the employer terminates the agreement by asking the employee leave before the end of the notice period, then the employee could claim the statutory minimum sums and the balance of the resignation period, if greater. GET ADVICE BEFORE YOU ACT It is always recommended to seek advice from an experienced employment lawyer before taking action that may result in a claim for damages. Contact Elyse Mallins of Devry Smith Frank LLP for advice for both employees and employers on legal workplace issues. “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By Fauzan SiddiquiBlog, Employment LawJanuary 29, 2020July 5, 2023
Can I Still Claim my Bonus even though I was Wrongfully Dismissed? This blog is co-written by our former articling student, Janet Son. In Andros v Colliers Macauley Nicolls Inc, the Ontario Court of Appeal recently addressed the issue of whether a wrongfully dismissed employee is eligible to receive a payment in lieu of bonus throughout the common law notice period. If the bonus is non-discretionary and an integral part of the employee’s compensation package, damages for wrongful dismissal include bonuses earned in the year of termination, on a pro-rata basis, plus a payment in lieu of bonus throughout the common law notice period. In this case, the respondent worked for the appellant, a large commercial real estate company. He left for other employment, however he returned and was promoted to the position of Managing Director, which included a base salary and a yearly bonus. In the last three years of his employment his base salary was $142,500 and his bonuses were $79,228.25, $127,933.80 and $49,757.51 respectively. The Court found that the bonus was non-discretionary since he received the bonus every year and his employment agreement included both the base salary and bonus entitlement in the compensation section. Further, the Court concluded that the bonuses were integral to the employee’s compensation, given the bonus amounts. The appellant argued that the employee was not entitled to any further bonus payments, because there was a term in his employment contract which stated that only employees who were in “good standing” were entitled to bonus payments. The Court applied the test from Paquette v TeraGo Networks Inc. to this case. 1. First, determine the employee’s common law right. Where the bonus is such an integral part of the respondent’s compensation, there is a common law entitlement to the bonus that the employee earned or would have earned. 2. Second, whether there is something in the bonus plan that removes the employee’s common law entitlement. In arriving at the decision to award the employee a payment in lieu of bonus throughout the common law reasonable notice period, the court addressed the inherent unfairness in a scenario where the notice period expires the day before the date on which the bonus would be payable. As a result, the employee would get no part of the bonus that they earned throughout the course of their employment during that year and the notice period – which the Court concluded would be unfair to the employee. However, an employer can contract out of the requirement to pay a portion of a yearly bonus for a partial year of service or throughout the common law notice period if this is set out clearly in the employment contract or bonus plan. If you are unclear as to whether you are entitled to your bonus in a wrongful dismissal claim, contact human rights and employment lawyer Marty Rabinovitch at 416-446-5826 or at marty.rabinovitch@devrylaw.ca “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By Fauzan SiddiquiBlog, Employment LawNovember 21, 2019July 5, 2023
