Every employer knows they have an obligation to provide reasonable notice payments (and possibly severance) when they terminate an employee in a “not for cause” situation.
In essence, an employer is to provide a financial payout to the employee that should cover their expenses for the amount of time typically needed to secure a comparable position at another company. More money is paid out for longer-term employees, those in senior positions, and those whose age may make it difficult to find another position.
Did you know that employers have a reciprocal right to reasonable notice from an employee who decides to leave the company, especially when it will be difficult to replace them? Did you know that an employer can sue a former employee if sufficient notice was not provided? But, did you also know there may be good reasons not to pursue this course of action?
What can an employer do if they don’t receive sufficient notice?
Workers in highly complex jobs are often harder to replace, meaning that the employer typically needs more than the standard two weeks notice to find a replacement.
Renowned employment lawyer Howard Levitt, tackled this issue during a recent episode of his weekly radio show on NewsTalk 1010 (listen to the podcast here):
“The question the Court will ask… is how long should it take that employer to find a suitably qualified replacement for that employee and train them and get them up-to-speed? If the answer is six months and the employee gives two weeks, the employer can sue the employee for damages they have suffered from not getting the extra five and a half months notice from the employee. It could be quality issues, it could be [loss of] sales, could be recruitment costs, could be any of a number of things. Whatever damages he suffers for the length of notice that he didn’t get relative to the length of time it should take to replace the position, that’s what he could sue for.” (Source)
Clear Path’s Anna Aceto-Guerin suggests the best place to start may be a conversation with the employee rather than a lawsuit. If the employee is leaving on good terms, they may be willing to stay long enough to train their replacement, even if it is on a part-time basis. Things get complicated when they are departing for a new job elsewhere. Their new employer may not be willing to wait the length of time the original employer needs for them to begin. In that circumstance, the original employer will need to decide if they are willing to take legal action and whether they are willing to deal with the unhappy employee.
Why do employers decide not to sue?
According to Levitt, most employers do not sue departing employees mostly because they are not aware of the option. Others may think it’s “bad corporate imaging to sue an employee.”
Aceto-Guerin concurs and also states: “Typically you do not want to keep an employee in your company who does not want to be there, even if you have the legal right to delay their departure. The impact they could have on your company’s productivity, your customers, and the influence they could have on other employees must be taken into consideration.”
How do you assess reasonable notice from an employee?
When determining how much time is necessary for reasonable notice, here are a few things to consider:
Successful $20 million case:
Failure to provide sufficient notice of resignation can be determined to be a breach of contract. Lawsuits against an employee for failing to provide reasonable notice are rare and typically only commenced against individuals alleged to be fiduciary employees and when substantial damages are at issue, such as in the case of GasTOPS Ltd. V. Forsyth.
In this case, four senior employees gave two weeks notice of their resignation after which they began a competing firm soliciting several of their former co-workers in the process. GasTOPS sued the four employees for breaching their fiduciary duties for misappropriation of confidential information, trade secrets and corporate opportunity. The company further stated that the employees failed to provide reasonable notice of their intention to resign.
The trial judge determined that the employees had breached their fiduciary duties and failed to give reasonable notice of their intention to resign. The judge ruled that the employees knew they had given inadequate notice and did so with the intent of destroying GasTOPS by rendering it unable to fulfil existing contracts or pursue new opportunities. Based on these facts, the trial judge held the employees ought to have provided GasTOPS 10 to 12 months’ notice, and awarded GasTOPS almost $20 million in damages, including prejudgment interest and costs.
What can you take away from this case?
An organization can affect how much time they request for reasonable notice from an employee depending on how they react to the employee’s announcement of departure. If an employer never requests a greater period of notice and accepts the short departure notice, they cannot go back and sue the employee for damages for unreasonable notice. Ensure that when requesting for extended notice, you can provide evidence as to why this would be necessary to have.
Have any questions?
Have any additional questions about setting up workplace policies for your employees? The HR professionals at Clear Path are here to help. Contact Anna Aceto-Guerin at email@example.com or toll free at (888) 336-0950 to get started.
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