Canada: Wrongful Resignation: Notice Means Notice!

Is an employee required to give notice of his or her resignation? The BlackBerry Limited v. Marineau-Mes, 2014 ONSC 1790 decision we tweeted about last week  @SM_EmployerLaw  considered this issue.  This blog provides more detail.

As always, our blog is a snapshot of what the court considered and decided. We encourage you to read the full-text of the decision for additional insight and information.

What happened

In the fall of 2013, BlackBerry Limited ("BlackBerry") offered an employee, Marineau-Mes, a promotion to Executive Vice President. In this role, he would be responsible for approximately 3,000 employees including 11 Vice Presidents and 70 Directors. He signed a contract for the new role on October 16, 2013 that required he provide six months notice if he wished to resign from this position:

Shortly after the contract was signed, BlackBerry, began experiencing economic challenges. A new CEO was appointed in November 2013. The new CEO advised  Marineau-Mes – whose promotion had not been announced – that his role might have a narrower scope than originally contemplated.

In December 2013, Marineau-Mes was offered the position of Vice President Core OS at Apple Inc.   In this position he would be involved in the development of software for the company's operating system. On December 23, 2013, Marineau-Mes provided written notice of his resignation to BlackBerry.  He advised the next day that he would likely be going to California to work at Apple within two months'.

BlackBerry reminded Marineau-Mes of the "notice" obligations under his contract (4.1above) that required him to provide six months' advance notice of his intention to resign.  When BlackBerry met with resistance, it filed an application for a declaration that the contract was binding and expired on June 23, 2014.

How did the employee respond?

The employee argued that the contract was not valid because:

• BlackBerry's remedy was an action for damages;
• The contract offended the Ontario Employment Standards Act;
• He did not assume the duties of Executive Vice President;
• The six month notice period was the equivalent of a non-compete covenant; and
• He had "Good Reason" to terminate the Employment Agreement.

The court did not agree and found that:

• BlackBerry was not seeking an injunction, but was seeking a declaration that the notice period was effective to June 23, 2014;
• There was no Employment Standards Act issue – BlackBerry did not end the respondent's employment, but it might very well have required his services before the notice period expired – the provisions of the contract constituted a reasonable notice requirement given the industry and the respondent's senior position;
• The respondent had assumed the duties of Executive Vice President – he received a pay increase commensurate with his promotion and although the announcement of his promotion was delayed given that a promotion freeze was in place, he was congratulated by colleagues and throughout the fall of 2013 played an important part on BlackBerry's team.
• The notice period was not a non-compete covenant. It was part of a written employment agreement used in an industry so that companies like BlackBerry could protect themselves. Even if the notice period constituted a non-competition clause, reasonable competition clauses are enforceable and the notice period in the employment agreement was not offensive or overreaching, but reasonable.
• The employee did not have "Good Reason" to terminate the agreement – requiring the respondent to assist with his transition out of the company instead of performing his regular duties did not amount to a material and detrimental alteration.

As a result of the court's findings, BlackBerry was successful in obtaining a declaration that the contract was binding on the parties.

What this means to you

This will not be a clause that every employer should have.  However, if you have employees that you must gradually transition out of your company when they resign, you may want to consider a resignation clause with a reasonable resignation period similar to the BlackBerry employment agreement. This decision acknowledges that some companies may need to protect themselves from the abrupt departure of senior executive level employees. The employee in this case had been a long term employee of a company acquired by BlackBerry in 2010 which would suggest that there was a need for a reasonable period of transition out of the company, given the knowledge of the industry acquired by the employee over that period of time. The employee also acknowledged that he had read, evaluated and discussed the agreement with his personal advisors and with representatives of BlackBerry.

• If a transition period is necessary for your organization, consider what would be reasonable and draft a resignation notice accordingly;
• The longer the employment and the more senior the employee, the more likely a longer resignation period will survive judicial scrutiny; and
• Always provide an employee with an opportunity to review the details, especially the employee's obligations, of an employment agreement with a personal advisor.