Global Employment Law

Court Dismisses Employer's Claim for Breach of Fiduciary Duty against Former Employee

In Aquafor v. Whyte, Dainty and Calder, an Ontario court has held that fiduciary employees are entitled to secretly plan to set up a firm to compete against their employer, to take the employer's clients, and to immediately begin competing after resigning provided there is no improper solicitation of clients or misuse of confidential information.

In this case, two professional engineers who were the "face" of their former employer, planned the launch of their own engineering firm while still employed. During non-business hours, they secretly leased space, constructed leasehold improvements and prepared a business plan.  The engineers gave proper notice of their resignations and told some of their clients they were leaving. Following their resignation, the new firm immediately began competing by sending announcements through publicly available client lists and by accepting work from clients of the former employer. The employer sued alleging breach of fiduciary duty. The Court held that while active solicitation of clients before a "reasonable time" has passed is improper, covertly planning the departure while still employed, continuing to serve clients who choose to move, and immediately competing with a former employer are permissible provided there is no improper solicitation of clients and no confidential information has been misappropriated.

For more information on this case, please see Heenan Blakie's Labour and Employment in the News, "Jumping Ship: Ontario Court Dismisses Claim Against Former Employees".