Canada: Resignation Without Notice: The Court Of Appeal Rules!

In its decision in Pharmacie Jean-Sébastien Blais inc. v. Pharmacie Éric Bergeron et André Vincent Inc., 2018 QCCA 1895, the Quebec Court of Appeal confirmed the unilateral right of a vital employee to resign without notice and to refuse to indemnify his or her employer for loss of clientele following the resignation.

Factual Context

In 2012, Mr. Blais, the plaintiff, became the owner of a pharmacy where the defendant, Mr. Lacombe, a laboratory technician, had been working for nearly 30 years. During that time, Mr. Lacombe held various positions, and was well-known and highly appreciated by the establishment's clients. Following the acquisition of the pharmacy by Mr. Blais, Mr. Lacombe raised several major issues with him, including inventory management problems, the change in location of the pharmacy, and the new owner's insistence that he take several training courses, which Mr. Lacombe found insulting.

This was the context in which Mr. Lacombe suddenly announced his resignation, effective immediately. Despite being asked, he declined to tell his employer what his plans were, and less than a week later, he began to work for another pharmacy in direct competition with his former employer. Over the ensuing weeks, more than 200 clients asked that their files be transferred to the competing pharmacy so they would be handled by Mr. Lacombe, whom they knew and appreciated so well.

Legal Proceedings

A lawsuit was subsequently filed by Mr. Blais and his pharmacy against Mr. Lacombe and his new employer, seeking damages for loss of clientele, and alleging unlawful solicitation and unfair competition. It was also alleged the defendants were using confidential information obtained during Mr. Lacombe's employment with the plaintiff pharmacy. The plaintiff also claimed damages for Mr. Lacombe's resignation without notice, contrary to Article 2091 of the Civil Code of Québec ("CCQ"), which provides that either party to a contract of employment for an indeterminate term may terminate it by giving notice to the other party within a reasonable time.

While it rejected most of the plaintiffs' claims, the Superior Court did allow the claim for an indemnity in lieu of reasonable prior notice of termination of employment. Considering the key position Mr. Lacombe held with his former employer for more than 30 years, as well as the circumstances of his resignation (which was characterized as untimely) the Court recognized the upheaval his resignation had caused for his former employer, while expressing certain misgivings about the latter's good faith during the events leading up to it.

The Court concluded that Mr. Lacombe should have given his employer two months' prior notice of his resignation, which potentially could have given the pharmacy sufficient time to recruit and hire a replacement for Mr. Lacombe, or better prepare for his departure. The Court therefore ordered Mr. Lacombe personally to pay the plaintiffs $12,000, the equivalent of two months' of his salary.

Not satisfied with this partial victory, Mr. Lacombe's former employer appealed.    

The Quebec Court of Appeal Decision

On appeal, the province's highest court upheld the trial decision, concluding that any employee has the right to put an end to his or her employment relationship without notice, even in order to go work for a competitor.

In the Court's view, by so resigning an employee does not contravene the duty to act faithfully and honestly under Article 2088 CCQ. This does not mean, however, that there are no consequences for resigning without notice. In such circumstances, the resigning employee is bound to remedy any harm caused by his or her failure to give the former employer reasonable notice before the resignation becomes effective. In this case, the Court considered that the two months' prior notice determined by the Superior Court was reasonable.

The Court of Appeal also confirmed that the abrupt termination of an employment contract without notice does not, per se, constitute an abuse of right, unless another distinct fault (such as defamation) was committed by the person terminating the contract.

Moreover, and while this may seem surprising in this case, the Court found that the evidence did not establish that reasonable prior notice would have allowed the pharmacy to take any effective measures to retain its clientele. Finding that the former employer was in fact seeking compensation for the lost opportunity to implement measures that would have allowed it to keep its clientele, the Court concluded that such a loss is not compensable in the absence of evidence of the financial impact that the measures would have had.

What is the Takeaway from this Decision?

The Court clearly specifies that the abrupt termination of an employment contract is not in and of itself abusive. One wonders, however, if this would also hold true were the termination initiated by the employer rather than the employee. Normally the principle should be the same, but the Court does not specify that would be the case if the roles were reversed. Does this give false hope to employers? Only time will tell.

However, this does not mean that terminating an employment relationship without notice will necessarily be without consequences, since the Court opened the door to the terminating party having to compensate the other party for the adverse effects of failing to give reasonable notice. In the case of an employee, the loss of income can readily be calculated, but for a business, loss of clientele or business opportunities is hard to quantify and prove. In this instance, despite the loss of some 220 clients to a competitor, the Court of Appeal did not find that there was any compensable harm.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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