The former CEO of Imperial Parking Canada Corporation ("Impark") was recently ordered by the BC Supreme Court to repay $1.2 million he received in severance pay after he was found to have breached his fiduciary duties to Impark. The CEO as well as individual and corporate defendants were also ordered to disgorge all profits earned by GoPark (the new company they started to compete with Impark) between January, 2012 and March, 2014.
The Court's decision in Imperial Parking Canada Corporation v. Anderson, 2015 BCSC 2221 was premised on the fact that Herbert Anderson, Impark's former CEO, was a fiduciary and therefore he owed greater duties to Impark than a "mere" employee would owe to his or her employer.
While all employees owe general duties of good faith, loyalty and fidelity to their employers, fiduciary employees are further obliged to act in the company's best interests, especially when their own interests conflict with those of their employers. While the vast majority of employees are not fiduciaries, top management employees almost always are. Title or formal position is irrelevant. Whether an employee is a fiduciary or mere employee is determined based on the specific facts and circumstances of the individual case.
In this case, while still employed as Impark's CEO, Mr. Anderson entered into a letter agreement with Michael Menzies, a consultant with Impark and a personal friend of Mr. Anderson's, releasing Mr. Menzies from one year of his consulting agreement, and eliminating the 2-year non-competition clause in that agreement. This effectively allowed Mr. Menzies to compete with Impark a full 3 years earlier than he was permitted under his consulting agreement. Mr. Anderson concealed the existence of this side agreement. After Mr. Anderson left Impark, having negotiated a severance package worth $1.2 million, he and Mr. Menzies started competing with Impark through their new company, GoPark.
The Court found that Mr. Anderson created the letter agreement to further his and Mr. Menzies' own interests, contrary to the interests of Impark, and he had therefore breached his fiduciary duties to Impark. Mr. Menzies knowingly assisted with that breach. The Court rescinded both the letter agreement and Mr. Anderson's severance agreement. Mr. Anderson was ordered to repay his severance, and all defendants were ordered to repay any profits earned by GoPark between January, 2012 and March 15, 2014, which was the earliest that Mr. Menzies' non-competition clause could have ended if he had given notice to terminate his consulting agreement in January, 2012 when he learned of the GoPark opportunity.
While the presence of a fiduciary relationship depends on actual nature of the position, and is not dependent on job title or the presence of a term in an employment agreement explicitly recognizing that an employee is a fiduciary, it is a good idea to include such language in an employment agreement for employees who are in a fiduciary role within an organization so that all parties are clear about the employee's role and associated expectations.
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