Summary

From the banks of the Ottawa River, a warning shot has sounded to all lawyers, bankers, brokers, accountants, chefs, hair stylists and any other professions where occasionally jumping ship is a rite of professional passage.

Employees have responsibilities even towards their ex-employers when they leave employment. These responsibilities are not onerous and, quite frankly, reflect common sense and good and fair judgment. For example, don't organize a conspiracy to depart, bringing with you colleagues.

Employees have to give their employers reasonable notice of their departure. Otherwise, the employee may be liable for damages.

All employees expose themselves to significant litigation and liability if, upon leaving, they pilfer or misuse their employer's proprietary information, especially if the spurned employer is deep-pocketed like the Royal Bank of Canada."Warning shot" quote box

Background

Employment law gives any responsible lawyer nightmares.

Not only is the law a distasteful concoction of common law and a variety of statutes, but the concoction has a decidedly different taste in each Canadian province. To this, one has to be aware of the constant flip-flopping and interference by the bench du jour of Canada's highest court. All authors of employment law textbooks would be well advised to publish their treatises in ring binders as it is endemic of this branch of the law that there are frequent changes.

When you hire an employment law lawyer, you are usually not receiving legal advice but, rather, legal wisdom and guidance. I have a sore throat from saying this but employment law is an art, not a science.

The latest salvo from the Supreme Court of Canada is a case where the facts lead themselves nicely to judicial intervention.

In RBC Dominion Securities Inc. v. Merrill Lynch, the Court had before it an application for damages against an ex-RBC broker who jumped ship along with several of his RBC-colleagues, to Merrill Lynch. All of this transpired in the heart of Kokanee beer country: Cranbrook, BC.

The case worked its way up, first through the provincial superior court and then to the British Colombia Court of Appeal which reversed the trial judge's decision.

At the Court of Appeal, Madam Justice Rowles disagreed with a brutally long majority decision and issued a smart minority judgment.

As if to emphasize the discord existing in Canada on employment law matters, on appeal to the Supreme Court of Canada, six judges sided with Rowles, and just one with the majority of BC's court of appeal.

So, in order to confidently state to any reader that "this is the law", we must mark the time and date of that statement as being 2:21 PM on Friday, November 14, 2008, AD.

As much as possible, there ought to be no residual legal responsibilities or obligations upon an employee, towards the ex-employer, when he or she leaves employment.

The law is based on common sense; a clean break is necessary to promote efficiency in the economy, occupational mobility.

But, let's be frank: Don Delamont pushed the limit. Not only did he orchestrate his departure along with the departure of other RBC brokers in Cranbrook, to sign on with competitor Merrill Lynch, but they even photocopied RBC client documents. That type of 'integrity' always weighs heavily on a trial judge.

Canada's Highest Court

To this, the Supreme Court of Canada responded with a hammer blow: a damage award of $1,483,239 against Delamont personally, and payable to his ex-employer, RBC. Add a substantial award in costs, in the high tens of thousands of dollars.

Writing for the majority of the Court, Chief Justice MacLachlan wrote in the nuts and bolts paragraphs of her reasons:

"Generally, an employee who has terminated employment is not prevented from competing with his or her employer during the notice period, and the employer is confined to damages for failure to give reasonable notice."Residual duties may remain" quote box
"To this general proposition ... may be (added) ... the qualification that a departing employee might be liable for specific wrongs such as improper use of confidential information during the notice period. This appears to be consistent with the current law, which restricts post-employment duties to the duty not to misuse confidential  information, as well as duties arising out of a fiduciary duty or restrictive covenant.

"The contract of employment ends when either the employer or the employee terminates the employment relationship, although residual duties may remain. An employee terminating his or her employment may be liable for failure to give reasonable notice and for breach of specific residual duties. Subject to these duties, the employee is free to compete against the former employer."

Comments and Conclusions

The difficulty is in sorting out what portions of the original trial judges decision received support from Canada's Supreme Court; what does the decision mean for lawyers, chefs and accountants who want to jump ship?

Trained though we may be, most of this can only be guesswork in anticipation of the next great decision from the ostentatious courthouse on Wellington Street in Ottawa.

Howard Levitt is a Canadian employment law author. In a recent article in the National Post, Levitt writes of the RBC v ML decision describing it as "a shocking change to the law" to hold Delamont to such heavy damages where RBC "had not been sufficiently prudent to have Delamont enter into a contract at all".

He's right. Note to employers: the best employment law advice in the world is always contract, contract and contract.

His advice:

"... non-fiduciary managerial employees still have high duties to support their employer in retaining their employees and even to report to their employer if their subordinates are about to depart. Aiding or abetting such a departure, organizing to leave with them, can give ground to substantial damages."

In most cases, the term "non-fiduciary managerial employees" is an oxymoron.

That said, and in a nutshell, Delamont paid a heavy price for conduct that ought to have struck him at the time as being wrong, if not outright illegal.

As with anything else in the law, whenever a person's moral antenna begins to shake it is usually a good indication that exposure to liability, civil or criminal, is "in the building".

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