The Ontario Superior Court of Justice Decision in Gagnon & Associates Inc. et. al. v. Jesso et. al., 2016 ONSC 209
Gagnon & Associates Inc. (“GA”) owned by Pierre Gagnon (“Gagnon”) is a heating, ventilation and air conditioning business. Barry Jesso (“Jesso”) was hired in 1996 to oversee shipping, receiving and pricing. Jesso was quickly promoted to a full time salesperson in 1997. The employment relationship was governed by a verbal agreement. By 2006 sixty (60) percent of GA sales were attributable to Jesso and another GA employee. Jesso’s compensation at the time was twenty-five (25) percent commission on sales and a base salary for a totaling around $180,000 per year.
Jesso felt underpaid for his efforts comparatively to other salesman working in the industry. Gagnon and his wife Susan, who was in charge of the GA payroll felt Jesso was being overcompensated. After negotiations over annual salary became hostile Jesso signed an employment contract with one of GA’s competitors. Jesso submitted his resignation with two (2) weeks’ notice conditional upon GA paying him $30,000 for outstanding commission. Gagnon did not acknowledge that there was any outstanding commission owed. Jesso did not work for GA again; as such no notice of resignation was given. Jesso’s new competitive office saw many of GA’s client transfer their business to it.
GA brought an action against Jesso for insufficient notice of resignation, which resulted in GA’s loss of sales after preventing GA the time to implement an appropriate transition plan. GA also alleged that Jesso owed GA a duty of loyalty and good faith, which was breached when Jesso joined GA’s competitor. GA further claimed that Jesso improperly used confidential information to entice GA’s competitor to open a office in Sudbury. Jesso claimed that he was still owed the outstanding commission sought at the time of his resignation.
Among the relevant considerations relevant to this topic, the Court assessed the following issues:
- if Jesso resigned, did he fail to give adequate notice of resignation?
- what damages, if any, are due to GA?
ONTARIO SUPERIOR COURT OF JUSTICE DECISION
After finding that Jesso had resigned, the Court first noted that it is a well-established principle that an employee must give their employer reasonable notice of resignation of their employment. Jesso was determined to have effectively given no notice, despite his two (2) week offer. The purposed notice period by Jesso was never undertaken, as GA did not agree to the condition of paying Jesso $30,000.
To determine how much notice is appropriate, the Court explained that “[t]he notice required of an employee will be a function of that employee’s position with the employer and the time it would reasonably take the employer to replace the employee or otherwise take steps to adjust to the loss.”(para 39). The Court determined that given Jesso’s significant percentage in GA’s sales and the evidence presented that it would likely take until September 2006 to fill the experienced sales position. Further, the Court took note that Jesso knew that another senior salesperson was leaving GA, as such Jesso’s departure would put GA in a significantly difficult position. As such, the Court found that given the above circumstances the appropriate notice period was two (2) months.
In determining the damages resulting from Jesso’s failure to provide adequate notice of resignation the Court assessed the drop in sales that occurred at GA in the months following Jesso’s departure. The Court pro-rated the sales loss to find a monthly rate of loss and concluded that for the two (2) months notice, which would have been adequate, Jesso’s departure caused a loss of $35,164. This amount was owed to GA from Jesso.
Although the situation in the above case is an example of a relatively rare action it is an important example of the liability an employee may be exposed to when resigning, if adequate notice is not given. A sudden resignation can expose an employee to liability of subsequent losses suffered by the employer as a result of the inadequate notice. The length of adequate notice will depend on the circumstances of the employment. It is advisable that an employee and employer should ensure that any employment contracts clearly specify any notice obligations and the consequence of failing to meet those obligations.