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
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
Employment Newsnotes (Issue 49, Summer 2010)
Employment Newsnotes (PDF) is an occasional publication by
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The forthcoming World Cup - issues for employers
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Prospects for employment law under the
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New
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Immigration - proposal for an annual limit on non-EU economic migrants
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Dangers for employers from professional networking websites (e.g. LinkedIn)
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Constructive dismissal - the Court of Appeal has ruled that an employer cannot 'cure' its breach of contract
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The current debate over reform of the
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Tougher sanctions for breach of data protection laws introduced last April
Significant Decisions in Labour, Employment, Human Rights, and Pension Law in 2009
In the last year, Canadian courts have tackled a wide range of legal issues that are relevant to employers. In the employment law context alone, the courts have considered the obligation of departing employees, the enforceability of non-competition covenants, and the ability of employees to commence a class action to seek damages for unpaid overtime pay.
To keep employers up to date on developments in the law, Heenan Blaikie's national labour and employment law practice has prepared a paper entitled " Recent Developments in Labour and Employment, Pension & Benefits and OHS/Workers Compensation" (pdf). The paper provides an overview of developments in the areas of employment, human rights, pensions, benefits, federal and provincial labour, workplace privacy, occupational health and safety, and workers' compensation law in 2009.
Rescission of Non-Competition Agreement
An employer can rescind a non-competition agreement at any time without giving a reason. This is possible under the condition that the agreement contains specific language providing for such right. It used to be believed that such right could only be exercised prior to the end of employment (ruling of Supreme Court of 8 February 2007; II PK 159/06). According to a recent ruling (4 February 2009; II PK 223/08), the time period to exercise this right can even extend until the expiration of the non-compete.