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Employment Law
Newsletter
March 2010 |
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Richards Buell Sutton LLP
700 - 401 West Georgia Street
Vancouver, British Columbia V6B 5A1
604-682-3664 |
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Greetings!
With the slow pace of the economic recovery, employers are still downsizing their workforces in an effort to stay afloat. It doesn't matter who initiated the end to the employment relationship, why the employment came to an end, or whether the employee held a senior or junior level position. All departing employees owe certain basic duties to their former employer, and the more senior key employees owe additional fiduciary duties, which restrict the type of post-employment conduct and business activity in which they are allowed to engage. Employers and employees both need to understand the basic restrictions imposed on departing employees.
These topics are covered in the newsletter below and should you have any further needs or questions, please don't hesitate to contact me directly.
Sincerely,
H. Scott MacDonald, Partner
Richards Buell Sutton LLP
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Duties Owed by Departing Employees
In today's business climate, employers are downsizing their workforces and losing good people who they simply can't afford to retain. Just a few short years ago, when the economic conditions were much more positive, employers were focused on trying to keep good employees who were being tempted away by competitors with better job offers.
Whether an employer has to dismiss an employee because of tough economic times, or the employee is resigning to pursue a better job opportunity in good economic times, the duties owed by a departing employee to their former employer, remain the same. All employees are subject to duties of loyalty, fidelity and confidence owed to their former employer. More senior employees, those in top management and key employment positions, are subject to additional fiduciary duties that continue even after their employment has been terminated.
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Junior Employees
Every employee, regardless of how junior the position held, is subject to certain duties that arise when their employment comes to an end. While the precise nature of the duty owed by the departing employee has to be considered on a case by case basis, there are a few simple rules of thumb to keep in mind. This list of "do's and don'ts" can always be varied by specific written agreements, but it provides a useful summary of the basic rules that apply to all departing junior level employees:
CAN DO
(*subject to express contractual provisions)
CANNOT DO
- Can't resign without providing reasonable notice
- Can't work for a competitor while still employed by first employer because duty of loyalty and fidelity continues until employment contract with first employer ends
- Can't misuse any confidential information, customer lists or trade secrets belonging to former employer
- Can't copy or memorize customer lists or records and use them to solicit former employer's customers
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Senior Employees
Employers are more vulnerable when they lose top management or key employees. Typically these senior employees have built strong relationships with their employer's key customers. The employer's customer base and its employees are typically the most important assets an employer can have. For that reason, the employer will often try to protect these key assets through written employment agreements containing specific restrictions preventing senior employees from competing, soliciting customers or employees, and accepting business from customers or hiring employees of their former employer, after they leave that employment. Even if there is no written employment agreement providing these additional protections to an employer, there are certain basic rules and fiduciary duties, which will bind and restrict the activities of senior employees on their departure. Some of the key fiduciary duties and the "do's and don'ts" of departing senior employees, can be summarized as follows:
CAN DO
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Can set up business in direct competition with former employer after term of employment contract ends*
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Can send out general business announcements, advertisements and solicitations to the general public, after employment ends
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Can accept business from former clients who approach you*
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Can use skills and experience acquired from former employer to pursue new opportunities
(* subject to express contractual restrictions)
CANNOT DO
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Can't do anything which conflicts with duty of good faith, fidelity and loyalty so long as employment contract has not ended (e.g. by organizing a mass exodus of employees under his or her supervision)
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Can't compete "unfairly" with former employer (e.g. by directly soliciting former employer's customers OR misusing its confidential information)
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Can't directly solicit former employer's customers because employer has proprietary interest in its trade connection with its customers
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Can't take any property or business opportunity belonging to employer or which employer is actively pursuing |
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Summary
Whether you are an employee considering a resignation from employment to pursue a better job opportunity, or an employer deciding to dismiss one of your employees, it is important to understand the consequences of a termination and the duties owed by the departing employee, even after the employment relationship has come to an end. If you are an employer and want additional protections before you dismiss an employee, then consider whether you can negotiate additional protection as part of a severance package. If you are an employee who wants to make a move, then make sure you have a full understanding of what you can do and cannot do before simply deciding to go work for a competitor and soliciting business from customers of your former employer.
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| About Our Law Firm
At Richards Buell Sutton LLP we approach legal issues based on our clients' strategic objectives. We make it a priority to understand your business requirements, the unique legal environments in which you operate and what motivates you. We focus on the big picture with attention to the details that matter to you. Our goal: to develop innovative, proactive solutions customized to meet your immediate and longer term legal needs. We provide legal services in the areas of business law, litigation, real estate, employment, wealth preservation, technology and intellectual property law.
The firm was established in 1871 and for over 135 years, passion, dedication and commitment to our clients have been the hallmarks of our firm. Richards Buell Sutton LLP
700 - 401 West Georgia Street
Vancouver, British Columbia V6B 5A1
Richards Buell Sutton LLP
604-682-3664 |
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Save the Date
in the Negotiation of
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Scott MacDonald is a partner at Richards Buell Sutton LLP and is the head of our Litigation Department and our Employment Practice Group. His preferred areas of practice include real estate (with an emphasis on commercial leasing disputes), insurance, employment, commercial litigation and dispute resolution.
Scott is a frequent lecturer on a broad array of legal subjects including commercial lease disputes, property and casualty insurance matters, employment matters and civil litigation topics. He is also a contributor to, and lecturer for, the Continuing Legal Education Society of British Columbia and has planned, coordinated and conducted a number of seminars for it over the years.
Scott's speaking experience includes seminars and presentations to industry organizations such as the B.C. Shopping Centre Association, the International Council of Shopping Centres, the Real Estate Board of Greater Vancouver and the Insurance Bureau of Canada.
smacdonald@rbs.ca | direct: 604.661.9217 |
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