BMO Suing Ex-Employees for Allegedly Unlawful Resignations

On November 8, 2011, three employees of BMO Nesbitt Burns in Collingwood resigned, and took positions with TD Waterhouse.

BMO is now suing all three employees, and TD Waterhouse too.  Allegedly, many of the accounts these employees managed promptly transferred over to TD Waterhouse.

The basis of the action is essentially rooted in the obligation of an employee to give notice of resignation.  At common law, the implied obligation to give "reasonable notice of termination" cuts both ways (though it can be amended by contract, too).  An employee, in general, cannot resign without giving notice.

There are exceptions, however, which I will come back to in a moment.

The case, as BMO appears to be framing it, bears shades of RBC Dominion Securities Inc. v. Merrill Lynch Canada Inc., which went to the Supreme Court in 2008.  In that case, an RBC branch manager orchestrated a mass defection of nearly all his branch's account managers to Merrill Lynch, causing a massive loss of business to RBC.  The Supreme Court upheld most of a significant award of compensatory and punitive damages against the employees and Merrill Lynch.  (It was a landmark case for a few reasons.)

In this BMO case, however, the ex-employees tell a different story.  They allege that a new manager had come into the branch and created a poisoned work environment, and eventually demanded their resignations when he discovered that they were being courted by TD.

When a manager demands an employee's resignation, the effect is usually very similar to dismissing the employee.  If that allegation is proven, then there is no chance of success for the allegation that the resignations were unlawful - they wouldn't really be 'resignations' at all, in the strictest sense.  Thus, this factual dispute is probably fundamental to the outcome of the litigation.

The employees' defence makes significant allegations of misconduct against the manager, including mistreatment of employees and clients, nepotism, etc.  BMO brought a motion seeking to strike these allegations, along with other 'abuse of process' allegations that the action was brought for an improper purpose.

In a recent decision by Master Muir, the Court largely dismissed the motion.  The defence of abuse of process can be raised, and the historical relationship between the employees and the manager is clearly relevant to the fundamental factual dispute between the parties.

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