Canada: Alberta Employment Law Update: Winter 2013

IN THIS ISSUE

  • Employee's Mitigation. The Alberta Court of Queen's Bench deducted two months from a 24-month notice period for the potential that a 50-year-old professional engineer would be able to mitigate his losses after judgment. The Court reasoned that, notwithstanding the plaintiff employee's attempts to mitigate his loss had not been successful in the ten months following his dismissal, it remained a realistic possibility he would find suitable employment within the notice period.
  • Solicitation and the Fiduciary Relationship. The Alberta Court of Appeal upheld a trial decision that a sports agent owed a fiduciary duty to his employer, and breached it by indirectly soliciting clients immediately following his dismissal. The employee's status as fiduciary stems from the responsibilities entrusted to him by the employer and his resulting ability to affect the economic interests of the company. The Court also held that termination of employment does not automatically relieve an employee of their fiduciary obligations.

SUMMARY OF DECISIONS

Hansen v Altus Energy Services Partnership, 2010 ABQB 820, [2011] AWLD 682 ("Hansen")

Hansen is an Alberta decision where the Court of Queen's Bench concluded a deduction of two months, from an award of 24 months, was appropriate as there was "certainly a realistic possibility that Hansen will find alternate employment within the notice period provided for" (at para 54).

The plaintiff in Hansen was a 50-year-old professional civil engineer who had worked for Altus Energy Services Partnership ("Altus") and its predecessors for 29 years. Over time, he had risen to the position of General Engineering Manager for which he received a salary of $160,000, a company vehicle, and an annual bonus. Leading up to his dismissal, Altus had reduced the hours of operation and the salaries of its employees by 20% and Mr. Hansen had accepted this reduction with the expectation that such reduction would only be temporary. Although Mr. Hansen's hours returned to their original level later on, his salary remained at the reduced level, notwithstanding a significant promotion. Despite several attempts to speak to Senior Management, his salary was never restored to its original amount and, soon after his promotion, Mr. Hansen was dismissed without cause or notice.

The Court awarded a notice period of 24 months in light of the plaintiff's years of service, his age, and his expertise. Justice J. H. Goss also concluded that taking three months to construct a resume, using the services of two headhunting firms, and regularly using the website of one of the headhunting firms to search for employment over a period of ten months following dismissal were sufficient to demonstrate the employee had fulfilled his duty to mitigate.

The trial took place within the notice period and Altus argued the notice period ought to be reduced to reflect the contingency that Mr. Hansen would find suitable employment before the expiry of the 24 months. The Court applied a contingency of two months to the notice period but provided little analysis with respect to how it reached the conclusion that two months was sufficient. Justice Goss cited only a "positive and long track record with the defendants" (at para 54*) as an indication of the "realistic possibility" Mr. Hansen would find and obtain suitable employment.

As of the date of publication, Hansen has not been reversed or distinguished. Matusiak v IBM Canada Ltd., 2012 BCSC 1784 ("Matusiak") is a more recent decision which provides very general guidance for determining deductions for contingency. In Matusiak, the trial took place within six months of the dismissal, and over half of the notice period remained. The Supreme Court of British Columbia held the employee was entitled to a notice period of 14 months, but agreed with the employer that "In the event the court determines that a reasonable notice period meets or exceeds 10 months... any award for reasonable notice should be reduced by one month to reflect the contingency that the plaintiff may secure alternative employment prior to the expiration of the notice period" (at para 47*).

Evans v Sports Corp., 2013 ABCA 14, 2013 CarswellAlta 19 ("Evans")

The appellant in Evans was a sports agent with The Sports Corporation ("TSC") and his contract was not renewed following the 2004-2005 NHL lockout. Mr. Evans claimed for bonus money, compensation and payment for the five-day period between when he was given his notice and the end of his contract. TSC counterclaimed, arguing Mr. Evans had breached the restrictive covenant prohibiting solicitation following his termination and, in the alternative, Mr. Evans owed a fiduciary duty to TSC which he breached when he solicited clients following his termination. TSC's counterclaim succeeded at trial and Mr. Evans appealed.

Prior to the termination of his contract, Mr. Evans discussed his departure from TSC with certain valuable clients and contacts, and asked whether they would follow him if he left TSC. Among those he approached were Jaromir Henys and Peter Kadlecek. Mr. Henys and Mr. Kadlecek have been instrumental in developing TSC's European connection by recruiting young players from Slovakia and the Czech Republic, and introducing them to TSC. Following Mr. Evans' termination, Mr. Henys and Mr. Kadlecek, as well as a number of clients, left TSC to join Mr. Evans. Mr. Henys and Mr. Kadlecek supplied the majority of Mr. Evans' new clientele.

On appeal, Mr. Evans argued the Trial Judge erred by concluding he was a fiduciary. Further, Mr. Evans argued he was not in breach of any of his duties because first, he did not directly solicit clients, and second, any applicable fiduciary obligations ended upon his termination.

Although Mr. Evans had never occupied a managerial or supervisory position, the Court of Appeal reasoned since he "was the face and voice of TSC in North America" and because he had been "entrusted with the primary responsibility for the development of these players" (at para 33*) the element of vulnerability fundamental to any fiduciary relationship was present in this case. There was no undertaking by Mr. Evans to assume the obligations of a fiduciary, but the Court of Appeal stated an undertaking was not required to demonstrate a fiduciary relationship existed. Instead, the Court of Appeal concluded the existence of a fiduciary relationship "relates to the responsibilities entrusted to an employee, including an attendant power to affect the economic interests of the company" (at para 34*). Mr. Evans' solicitation of TSC's clientele was ultimately characterized as "the appropriation of a corporate opportunity" (at para 35*) for his own benefit.

The Court of Appeal in Evans effectively reversed ADM Measurements Ltd. v Bullet Electric Ltd., 2012 ABQB 150, 59 Alta LR (5th) 278 [ADM], which was discussed in the Davis LLP Summer 2012 Employment and Labour Bulletin.

In ADM, the Court of Queen's Bench stated the element of vulnerability alone was not sufficient to establish a fiduciary relationship exists. In addition to the element of vulnerability, there must be an undertaking by the employee. ADM relied on the statement in Alberta v Elder Advocates of Alberta Society, 2011 SCC 24, [2011] 2 SCR 261 ("Elder Advocates"), that to be a fiduciary, the employee must provide an undertaking to act in the best interests of the employer (at para 30*). Evans however, restores the more expansive approach to the characterization of fiduciary duty.

On appeal, Mr. Evans cited ADM as authority for the principle that even if a fiduciary relationship did exist, his fiduciary obligations ended once he was dismissed. The Court of Appeal reversed ADM on this point as well, expressly rejecting "the view that a termination of employment will automatically relieve a former employee of ongoing fiduciary obligations" (at para 37*) and concluding that "TSC's relatively minor breach of contract is irrelevant to Evans' ongoing fiduciary obligations, and does not serve to relieve him of them"(at para 37*).

The Court of Appeal concluded that while Mr. Evans did not solicit business directly from TSC's clients, he solicited clients indirectly through Mr. Henys and Mr. Kadlecek. Mr. Evans had done indirectly what he was prohibited from doing directly. Although in this case, the Court of Appeal held that indirect solicitation was a violation of fiduciary duty, its conclusion was largely based on the Trial Judge's findings of credibility and it remains to be seen whether this particular aspect of Evans will be distinguished.  

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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