IN THIS ISSUE:
- Placing restrictions on departing key employees
- Constructive dismissal and fixed term contracts: when "not renewing a contract" is really a termination
- The dangers of calf-roping simulators at a Stampede Party
Placing Restrictions on Departing Key Employees
Jardine Lloyd Thompson Canada Inc v Harke-Hunt, 2013 ABQB 313, ("Jardine")
In Jardine, the employer sought and obtained an injunction against the former employer, preventing her from: (1) soliciting present employees to leave their employment; (2) soliciting business from the employer's present customers and (3) divulging confidential information acquired through employment. The injunction was imposed for one year or until the end of litigation.
The Court granted an injunction against the employee, finding that she was a "key employee."
The Court considered the following in finding that Harke-Hunt was a key employee:
1. She was top management and Managing Director of a corporate department;
2. She was a "key person to the corporation";
3. She established a substantial 'Book of Business';
4. She had long-standing personal and trust relationships with corporate clients;
5. She had some decision-making authority and the power to exercise discretion and bind the corporation.
Given the employee's close connection with current clients, her knowledge of the Book of Business and the value of that Book, the Court found that the employer would suffer irreparable harm if the injunction was not granted. The Court also found that the employer, and not the employee, would suffer greater harm if the injunction was refused pending a decision of the case on its merits. The Court decided this point in favour of the employer due to the employee's potential inability to pay damages at the end of the day.
Although the Court conceded that it was difficult to balance whether or not to grant the injunction, the employee's designation as a "key employee" tipped the balance in favour of the employer. Generally speaking, when a fiduciary employee leaves, she will be prevented from, among other things, soliciting former clients for a 'reasonable time after departure'.
The Court of Queen's Bench has made it clear that if employers seek to impose interim restrictions on employees during the course of litigation, they must make a strong case that the employee is a fiduciary by proving they are a 'key employee'. On the other hand, the Court recognized that the employee was still free to do business with other companies, provided that those companies seek out the employee, and not the other way around.
The Court's decision reinforces the long-held notion that high-ranking, fiduciary employees who occupy positions of trust and confidence can be subject to much more onerous post-employment obligations than regular employees.
Constructive Dismissal and Fixed Term Contracts: When "Not Renewing a Contract" is Really a Termination
Thompson v Cardel Homes Limited Partnership, 2013 ABQB 353, ("Thompson")
In Thompson, the Court analyzed whether or not a former senior employee was terminated or whether his contract was simply not renewed. If the contract were simply not renewed, then the employee would not be entitled to his contractual one year's pay in lieu of notice.
Mr. Thompson (the "employee") was employed as a full-time Regional President under a written, fixed term contract that included both a severance clause and a termination of employment clause. In the event that the employee were to be terminated, he would be entitled to 12 months' pay in lieu of notice. However, another clause also stated that the employer had the ability to provide notice that it was not renewing the contract.
The employee was given notice in September 2011 that his contract was not being renewed for October 2011. The employer advised the employee that he no longer had any work responsibilities, ordered him to clean his desk out and withdrew access to his email and computer. The employer advised the rest of the company that the employee was no longer working there. Prior to this, there was no indication that the employer would not continue the relationship and the employee expected to work beyond October 2011. The employer took the position that notice had been given, the contract was not being renewed and paid the employee until late October 2011.
The Court framed the question to be decided in terms of repudiation of the employment contract and constructive dismissal. Repudiation occurs where an employer makes a unilateral change to a fundamental term of an employment contract, leaving the employee to accept or reject the repudiation. Constructive dismissal is assessed by determining whether a reasonable person in the same situation as the employee would have felt that the essential terms of the employment contract were being substantially changed.
The Court applied these tests and determined that the employee had been terminated, and not merely been given notice that the contract would not be renewed, the Court applied the tests for repudiation and constructive dismissal, holding that the employee was in fact constructively dismissed, despite the terms of the employment contract. Consequently, the employee was entitled to treat the employer's actions as a repudiation of the employment contract and receive damages contracted for him in his employment agreement.
Employers should be aware that the principles of repudiation and constructive dismissal will influence the interpretation of employment contracts and provide the employee with different legal options upon termination. Inserting clear "renewal/non-renewal" clauses in the employment contract may assist employers in proving that non-renewal, and not termination, was the option contemplated by the parties upon signing the agreement.
The dangers of calf-roping simulators at a Stampede Party
Alberta v XI Technologies Inc, 2013 ABCA 282, ("XI Technologies")
In XI Technologies, the employer was charged under the Occupational Health and Safety Act with (1) failing to ensure the health and safety of its employees and (2) failing to ensure all equipment used at a work site would safely perform the function for which it was intended or designed, after one of its employees was killed while attempting to operate the calf-roping machine without the use of an instruction manual. The trial judge acquitted the employer, but the summary convictions appeal judge overturned this and entered convictions. The Court of Appeal confirmed those convictions.
Although this was a customer-appreciation Stampede Party, the trial judge found as a fact that the employee who died was still both (a) engaged in an 'occupation' at the Stampede Party and that he was (b) assisting the employer in carrying out a 'business purpose' when operating the machine throughout the day. The calf-roping machine allowed users to sit on top of a fake horse, under which a mechanical calf was inserted and spring loaded. The calf would spring out of the machine when the rider pushed a release button.
On the day of the party, the machine was delivered late, the delivered machine was not the one initially ordered and further there was no operator, operating manual or safety guidelines. The employer was merely left to use the device as the employees saw fit.
The employees worked out a system of loading the calf into the machine so that the calf would shoot out of the machine so party-goers could attempt to rope it. Although the employees operating the machine developed ad hoc safety procedures, nobody knew what they were doing and there was no evidence that any of the employees were familiar with the machine prior to the day of the party. In order to make the machine work, one employee had to physically reach inside of the machine to ensure its operation.
At all times, there was a likelihood of premature release due to the sensitive 'release' plate. Eventually one employee had to reach far into the machine to disengage a hook when he was struck by a lever attached to the machine because the person riding the horse had pushed the release button too early. The Court of Appeal commented that "In this instance, once the hazard was detected, a reasonable employer would have simply placed the [machine] off to the side and hung an 'out of order' sign on it." The Court also upheld the summary appeal judge's finding that the danger was "reasonably foreseeable."
The Court concluded: "That XI Technologies would even consider operating a machine that no one had any familiarity with and without either its own operator or a proper set of written instructions in itself speaks volumes as to the lack of due diligence in this matter. This is particularly so given that the machine was going to be used by party goers who would be consuming alcohol." Employers should be aware of the dangers involved with renting simulator machines at official business functions and should ensure that they offer proper instructions regarding their use and operation. More importantly, customer-appreciation parties are not beyond the scope of employment and employers may become liable for mishaps or injuries that occur during those events.
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.
