Canada: Post-Employment Obligations For Fiduciary Vs Non-Fiduciary Employees

Last Updated: July 31 2019
Article by Ashley Savinov

The Supreme Court of Newfoundland and Labrador recently released a decision regarding an employee's post-employment obligations in relation to confidentiality and non-competition with respect to their former employer. The full decision, Safety First Contracting (1995) Ltd. v. Murphy, 2019 NLSC 47, can be found at the following link:

https://www.canlii.org/en/nl/nlsc/doc/2019/2019nlsc47/2019nlsc47.html?autocompleteStr=safety%20first&autocompletePos=1

Overview

Patrick Murphy ("Murphy") was employed as Operations Manager with Safety First Contracting (1995) Ltd. ("Safety First" or the "Company"), a company involved in the management of traffic diversion and safety during road redesign and construction activity. The Company had a virtual monopoly in the traffic control business in the St. John’s area between 2011 and 2016.

Murphy resigned from his employment with Safety First on May 9, 2016, after approximately 14 months of service and three weeks later went to work for a competitor, Hi-Vis Traffic Control Inc. ("Hi-Vis"), in a management position. Hi-Vis started operating on June 1, 2016, which marked the end of the Company's near monopoly. As a result, Safety First alleged that Murphy breached his confidentiality and non-competition agreement with the Company, was in breach of confidence, and committed wrongful conversion of trade secrets. Alternatively, Safety First claimed that Murphy violated his common law obligations of confidentiality and non-competition. Safety First also sought damages against Hi-Vis, alleging that it was vicariously liable as the beneficiary of Murphy's unlawful actions. Murphy denied the existence of a confidentiality and non-competition agreement and that he copied or shared any of Safety First's trade secrets.

Analysis and Decision

At trial, the Company's claim against Murphy was dismissed in its entirety. With respect to the existence of a confidentiality and non-competition agreement, Justice Goodridge considered conflicting witness testimony and found that while the Company may have intended Murphy to sign a confidentiality and non-compete agreement prior to the start of his employment, the agreement was never signed and returned to the Company. Despite the Company's suggestion to the contrary, Justice Goodridge also found that there was no motive for Murphy to steal or destroy this agreement. The accepted evidence was that Murphy resigned his employment with Safety First to start a small engine repair business. It was only after his resignation that he was approached by the owner of Hi-Vis to come work for them.

The common law confidentiality and non-compete obligations for an employee post-employment differ depending on whether an employee is a fiduciary or a non-fiduciary employee. Fiduciary employees are key, senior management employees and have more onerous restrictions post-employment which require them to refrain from actively soliciting customers of their previous employer. Non-fiduciary employees' obligations are much less rigorous; these employees are entitled to use, with their new employer, the general skills and knowledge acquired as a result of the previous employment relationship. Both fiduciary and non-fiduciary employees however, have obligations not to retain confidential documentation for the use and benefit of a new employer and not to disclose confidential information.

Justice Goodridge discussed that courts are cautious in classifying an employee as a fiduciary without the clearest of evidence, due to the more onerous legal restrictions imposed post-employment; the law favours allowing an individual the freedom to pursue economic advantages through mobility in employment. He held that Murphy's position was more administrative in nature compared to a senior management role. Murphy did not have significant decision making authority, had limited access to corporate information and did not handle funds. In other words, he was not a key employee for Safety First. In concluding that Murphy was a non-fiduciary employee, Justice Goodridge reiterated that there were still post-employment obligations imposed upon him not to copy and remove confidential information for the benefit of his new employer. On the facts of the case however, Safety First failed to prove that Murphy breached any such obligation of confidentiality. Safety First also failed to prove that Murphy copied trade secrets, e.g. practice manuals, customer lists, pay scales, etc. to use at Hi-Vis.

While Murphy denied that he copied an employee list from Safety First, he admitted that he contacted several employees to come to a recruitment meeting after commencing his new role with Hi-Vis. He had some employee contact information in his phone from his time working at Safety First. Justice Goodridge held that there is nothing inherently wrong in a former employee approaching his/her former co-workers to try and entice them to accept employment with a competitor, so long as there was no reliance placed upon the former employer's documentation to obtain the contact information. Of note however, this finding was made with respect to Murphy being a non-fiduciary employee and does not consider the issue of inducing breach of contract. Finally, since Justice Goodridge dismissed the Company's claim that Murphy wrongfully converted trade secrets, he had no need to address the issue of Hi-Vis's vicarious liability.

Takeaways for Employers

This case illustrates the importance of ensuring employees sign and return employment contracts prior to starting work with a new employer and for employers to safeguard such records. It also provides a reminder that, regardless of whether there is a written contract of employment which sets out an employee's responsibilities in relation to non-competition and confidentiality, after the employment relationship ends, an employee is not permitted to take away confidential information for the use and benefit of a new employer. Finally, although not discussed in the decision, it is important for new employers to be aware that should a key employee (i.e. a fiduciary) be hired from a competing business, the new employer may be found liable for damages if the new employee breaches his/her continuing obligations with the former employer and provides confidential information to the new employer, for its benefit.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions