The Law of Resignation, Part Three: I Quit! Now what?

As discussed in a previous blog post, a resigning employee should provide advance written notice of their resignation. Whether an employee has given two weeks or two months of notice, that person remains an employee and must continue to perform the duties and responsibilities expected of their position until the earlier of the date their current employer terminates their active service or the expiry of their resignation notice period. Until active employment ends, resigning employees are still expected to work loyally and in good faith for their employers. This places resigning employees in a delicate situation, as they may want to start preparing to work for their new employer or for a new business they are starting prior to their departure date or even actually start work for the new employer. Where the new employer competes with the current employer, the risk of a conflict of interest is highest. This post discusses some of the things resigning employees must avoid during their transition to new employment.

Even when leaving to start or join a non-competitive business, resigning employees must continue to perform a “day’s work for a day’s pay” for their employer and not dedicate material paid working time to the new job. Thus resigning employees should ensure that activities related to a new job or business are conducted outside regular working hours and do not detract from performing their job duties. Time on calls or meetings relating to job search and hiring by a new employer during the regular work day should be kept to a bare minimum to avoid claims of “time theft”. There is a grey area around how far employees may go in steps to set up a new business before their departure date. Some employees who are fiduciaries or under non-compete covenants may not be able to take any steps prior to their departure date. For the rest, any steps to set up a new business, particularly a competing one, should be restricted to planning and making arrangements to launch the business but stop short of actively starting the business. Examples of activities to avoid prior to departure would include advising customers of their planned departure and encouraging the customers to transfer their business to the new firm, soliciting customers generally, selling on behalf of the new firm or advertising the new business.  This is particularly critical where the new employer is competitive with the current employer. Broadly speaking, preparatory steps to plan and get ready to open a business are permissible but active steps to launch the business such as marketing and sales activities are not.

Where possible, resigning employees should try to agree with their employers on what they can tell customers and other business partners about their departure and new job. Failing agreement, the resigning employee should limit communication to advising of the date of their departure and refrain from any further discussion that could be construed as soliciting the customer or business partner prior to departure.  Any solicitation of customers and business partners should be done after the departure date, subject to any applicable non-solicit covenant or fiduciary duty.

Employees should also resist the temptation to copy, transmit or download confidential information, such as customer lists and information about pending business opportunities or marketing or business plans, to use at their new job. Generally, such information will be considered confidential or at least as employer property and thus taking it is a breach of their obligations to their current employer.  Employees should also be aware that modern IT systems can often detect and stop such activity. We recommend that departing employees return all employer documents and delete any electronic copies on their personal computers and phones to avoid allegations of breach of confidentiality. However, some case law suggests retaining customer email or telephone numbers on a personal cell phone, without more, is not necessarily a breach of confidentiality. Employees should use publicly available information and the internet to create contact lists for prospective customers at their new job.

By following the rules above, departing employees can ensure that they transition smoothly into their next job without facing claims of wrongdoing from their previous employer.

If you want more information on this topic, you can contact us at:

Geoffrey Howard:          ghoward@howardlaw.ca

604 424-9686

Sebastian Chern:            schern@howardlaw.ca

604 424-9688