Your CEO resigns and your plans are exposed. Is there any recourse?
Original posting by Howard Levitt in the Financial Post, August 22, 2018.
You hire a prominent executive and open your corporate vault, exposing her to your secrets. She goes on a national tour meeting with all of your stakeholders, even the media, coordinating, as you understand it, your future plans and developing public acceptance for their implementation.
Then, one day, your CEO resigns, effective immediately. Hours later you see her holding a press conference to announce that she is running for political office.
Things get worse. When her policy proposals are launched, on the list is a plan which bears a striking resemblance to precisely what she had been working on for you. Your most important secrets are now disclosed to the public domain.
What would you do?
Jennifer Keesmaat signed on as CEO of the Creative Housing Society (CHS) to create affordable rental housing in Toronto and Vancouver. Her CHS boss, Ian Gillespie, hired her to take advantage of the $40 billion housing plan announced by Prime Minister Justin Trudeau. She was working on developing affordable public housing, and spending much of her time meeting with the press about her employer’s housing plan. Five months later she quit — just before a press conference announcing her intention to run as a mayoral candidate in Toronto.
Michael Emory, CEO of Allied Properties REIT, a collaborator in CHS’s project, learned of her resignation only after her press conference. “I was quite literally dumbstruck and in disbelief,” Emory told Toronto Sun reporter Sue-Ann Levy, who wrote that Keesmat’s announcement as mayoralty candidate “seemed to be taken right from (her employer’s) playbook”. Emory said the whole template was “
Gillespie’s inspiration,” not Keesmaat’s. “It was opportunistic in the extreme and I don’t think it was her initiative to lever off of,” he told Levy.
If this happened in business, the executive might not only be sued but could well be unemployable going forward. What employer, after all, would hire an employee who appears to view a job as an opportunistic springboard for personal aggrandizement?
What are the legal implications? Might her employer have recourse against Keesmaat?
It is little known that employees have to provide their employers with advance notice of resignation. And I don’t mean two weeks notice but sufficient notice for the employer to recruit and train a replacement and get him or her up to speed. Ironically, employers inserting two or four weeks notice into their executives’ employment contracts actually reduces the notice that the court would otherwise require.
With someone in Keesmat’s position, reasonable notice would be at least three months. When less is provided, the employer can sue for wrongful resignation and recoup all of its damages for the inadequate notice. It is really the flip side of a wrongful dismissal claim.
Emory told Levy that Keesmaat’s employer was left in the lurch by her and almost had to start over with their housing initiative. If that is the case, CHS’s damages could be considerable. They could include the costs of an executive recruiter and all of the various costs getting the project back on track and progressing.
But that might be the least of any lawsuit. If Keesmaat disclosed confidential information or information proprietary to her former employer in her policy platform, CHS could sue for any damages which it suffered.
It does not matter whether she signed a non-disclosure agreement or a confidentiality provision. Many employees, particularly executives, sign such documents. But they are generally moot. The law is that every employee has a duty of confidentiality. Employees cannot disclose any confidential or proprietary information they learned at their job, which is not already part of the public domain.
Ironically, sometimes employers, in their zeal to have employees sign confidentiality agreements, actually reduce their own protection by creating contracts, which are less all-encompassing than the confidentiality protections provided by the law in the absence of a contract. If Keesmaat has revealed anything proprietary to her former employer, CHS can sue her for whatever damages it suffers as result.
There are ethics and there is law. Sometimes the twain meets.