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Blog Bite: No Intention to Repudiate Employment Agreement Found in the Dismissal of Former Employee


An Ontario decision recently decided that General Motors of Canada Ltd (“GM”) did not commit a breach of an employment contract with a former employee. The Court of Appeal stated that the absence of evidence indicating a constructive dismissal or a failure to mitigate an employee’s intolerable circumstances will not establish an intention to fundamentally breach an employment agreement.

In General Motors of Canada Ltd. v Johnson (2013) ONCA 502, Johnson sued for damages for breach of his employment contract by claiming that he was constructively dismissed due to GM’s failure to provide a racism-free work environment. The respondent based his claim on the appellant’s lack of disciplinary measures during three separate internal investigations, where one included a third party employee refusing to train with Johnson. Johnson claimed the third party employee refused to train with him because of the colour of his skin. In order to establish a wrongful dismissal, the plaintiff must establish on an objective basis that a reasonable person would have felt that the essential terms of the employment contract were substantially changed and that the offending conduct must be persistent and repeated unless a stand-alone incident is enough to taint the entire workplace. The Court of Appeal reversed the trial judge’s decision after finding no direct evidence of racism towards Johnson by anyone at GM, where the third party employee’s reasons for missing the training session were found to be sincere and not motivated by racism. The Court also stated in obiter that if a party to a contract (and in this case, the plaintiff), demonstrates an intention to no longer be bound by it, that party is committing a fundamental breach which results in the contract’s termination.

Key Take-Away

To avoid a potential wrongful dismissal claim, an employer may consider entering into a mutual release with the employee upon termination of the employment agreement. This is a condition that can be included in an employment agreement for termination.

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MR. BREXIT, and Making Political Sense of the Implications of Brexit for Canadian Businesses.

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Donald Trump posted this tweet at 5:11 A.M. and mystified the internet. In flowed the jokes and memes, but the underlying political commentary is perhaps the best of all. If you think about it, Brexit is a lot like Donald Trump—loud, fearful, anti-immigration, and perhaps more bark than bite.

That last one might be a new one to think about, at least in the case of Brexit. After all, when on the morning of June 24 it was announced that not-so-Great Britain had voted to leave the European Union, all hell broke loose. It was emotional and economic turmoil. The British pound dropped, the markets dipped hard, and financial analysts started to sound the bells of disaster and recession.

But in the months since, it has become apparent that while Brexit is bad, it isn’t a destructive force. It’s more of a growth-stunting one, especially for any other country besides Britain, like Canada.

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So maybe it’s a good thing Canada stepped back a bit from Mother Britain a while ago, because with only 2.5% of its trade tied up in the country, Brexit is expected to land a much softer blow than expected to our economy and business. The United States might feel good about itself for running away from home, with various Brexit projections pointing to chances for the dollar to strengthen and the economy to benefit from people fleeing risky British financial prospects for the safety and security of American ones.

The worst of what Canada can expect globally from Brexit is major structural shifts to how Canadians conduct business with and export to Europe. Many Canadian businesses use Britain as an entry point into the European market, so the country’s withdrawal from the European Union will complicate market penetration. Businesses will have to overhaul their business plans and expansion methods, move, or possibly even downsize. While Brexit itself will be a long and drawn out process filled with legislative and legal drafting, Canadian businesses will face some of the same while trying to accommodate these changes.

Hitting closer to home, Brexit can have troubling implications for Canadian housing markets. The pressure of economic instability will push financial institutions to keep interest rates low not only in Britain, but also the United States and Canada. This might sound like a good thing, but considering the critically-inflated state of the Toronto and Vancouver housing markets, low interest rates might just agitate prices further and make it even harder for people to buy houses than it already is.

However, beyond foreign business and housing, the consequences of Brexit are minimal at best, and even considered temporary. Canada’s GDP fell a little, as did the Canadian dollar, and Canadian economy growth projects shrank. There is worry that Brexit will make it harder for Canadians to obtain work visas and to immigrate, but when Britain is done losing workers to Brexit, candidates from other countries will grow to be increasingly attractive options.

In response to concerns about losses and lower returns on investments, RBC’s chief economist, Eric Lascelles, said, “We continue to operate on the assumption that markets will first overreact, and then reclaim some of their losses.” While it is a deeply disturbing idea with troubling potential consequences, the numbers say otherwise. Maybe Brexit is something the markets have to clear their heads about and get out of their system, just like the United States has to with Donald Trump.

To see standard corporate and employment agreements, visit our Small Business Law Library!

This article was co-authored by: Alina Butt

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Employers Beware: Does Your Employee Owe a Fiduciary Duty Post-Termination?

A recent Ontario Court of Appeal decision affirmed that employees who play a vital role in a company owe a fiduciary duty to their employer even after termination.

Dear boss

In GasTOPS Ltd. v. Forsyth, the defendants resigned from GasTOPS, a developer of computer software for gas turbine engines, without providing a reasonable notice period and formed their own competing company called MxI. This left GasTOPs unable to fulfill its contractual obligations with several clients and unable to pursue business opportunities planned for with prospective clients.

At trial, the defendants were found to play a key role as senior designers of several products and in possession of vital information including a list of current and prospective clients and their needs. The Court held that an implied fiduciary relationship was owed to GasTOPS since the defendants were in a position to exercise power that could leave the company in a vulnerable position. This duty was held to be breached by the active solicitation of the plaintiff’s clients and through the misappropriation of confidential information for the benefit of MxI.

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MxI were ordered to disgorge their first ten years of profits and the defendants were held jointly and severally liable for the same amount entitling GasTOPS to an award of over $20 million. The defendants’ appeal against the period of disgorgement was dismissed. The Court of Appeal upheld the remedy due to GasTOPS’ operating market which entailed a very small number of high paying customers.

This case stresses how employees are expected to serve their employers honestly and faithfully by acting in their best interests at all times. A fiduciary duty further elevates this expectation by requiring employees to avoid all conflicts of interest, to act only in the best interests of their beneficiary, and to not profit from their position. To establish a duty, the Court will look at how important an employee’s role is within a company. Factors including the employee’s duties, their contact with customers and suppliers, their influence over the company’s sales and pricing practices, and the degree of confidentiality over such information will be assessed in finding a fiduciary relationship.

 

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What if an employee wants to compete with their employer?

A fiduciary is not barred from competing with its former employers. They must however disclose their intention to compete prior to issuing a notice of termination. Without the consent or approval of their employer, fiduciaries are prohibited from engaging in any business opportunity and using any confidential information obtained during their employment for their own personal use.

What forms of solicitation are acceptable if an employee is competing with their former employer?

A fiduciary has a duty to not solicit any of their former employer’s clients or employees. In Resevoir Group Partnership v. 1304613 Ontario Ltd., the Court indicated that this duty is intended to preserve the goodwill and reputation of the employer. However, solicitation entails more than passively receiving a client. A fiduciary only breaches this duty if they have finalized a business arrangement with someone they have been directly enticing. Therefore, general advertising of services that attract a former employer’s client is an acceptable practice. This same principle however does not apply for employees. Regardless of whether they were actively solicited, a fiduciary will not be acting in the best interest of their former employer by hiring any of their current employees.

Key Take-Aways

  • After termination, employees may still owe a fiduciary duty to the Company they were employed with.
  • An employee may compete with their previous employer if they provide the employer with notice to compete, along with their notice to terminate.
  • Employers must ensure they include a strong non-solicitation and non-compete clause in their employment agreements to protect their business.

To view our employment agreement templates, click here!

This article was co-authored by: Gurinder Gill

This article is provided for informational purposes only and does not create a lawyer client relationship with the reader. It is not legal advice and should not be regarded as such.  Any reliance on the information is solely at your own risk.

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Gotta Catch ‘Em All: Pokemon Go and Your Privacy

Unless you’re living under a rock, you’ve heard of Pokemon Go.  The mobile game which revamps the 90’s anime franchise has swept the world.  Created by Niantic, Inc., and more popular than ever-addicting social media platforms like Snapchat, the location based augmented reality game allows users to capture, battle and train virtual Pokemon as though in the real world.  More on augmented reality here.

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With Every Great Technological Advance Comes Great Legal Responsibility

While the game has increased players’ physical activity and been attributed with helping those with mental disorders, depression, and anxiety, it has also created many legal concerns, including

  • trespassing;
  • Physical injuries; and
  • arbitration rights.

But, with all the data that Pokemon Go is collecting from its players, who average 43 minutes of playing time per day, the major legal issue seems to be privacy.

The Data Exploitation of Pokemon Go

Niantic has its basics covered: there is a clear link to the company’s clear and understandable privacy policy, which includes steps taken to protect children’s privacy.  Furthermore, when the game first launched, the initial privacy scare concerning full access to users’ Google accounts was resolved quickly.  But the real privacy issue concerns the app’s data collection.

From the beginning of game play, players are giving the app a lot of information. Some of it seems harmless: e-mail address, name, naming your Pokemon, etc. But the real concern is its constant location tracking, a feature you consent to being accessible for other users to see.

Pokemon Go is definitely not the first game to sell persistent location tracking as a “service” but it is one of the most successful, with some 100 million installs to date and the most downloaded app on the App Store during its launch week.  By playing the game, users agree to allow Niantic, and fellow users, to track their location any time the app is in use.  For most users, who await the buzz of their phones to indicate a Pokemon is near, this means their app is always on, making Niantic a little less like a tech company and a little more like Big Brother.

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How is the data going to be used?

The privacy policy allows for the collected information to be sold to third party marketing companies to better market to consumers; however, it is clear that the data will be grouped together and any identifying information will be stripped.  Overall, it’s unclear whether the data is solely being used by Google to improve its mapping product, or whether it will be used for a more nefarious purpose: hyper-targeted, location-based advertising.  While providing users with an ad for a restaurant that you just happened to pass by may seem harmless, it would be easy for Niantic to increase the sales of any store – all they would have to do is create a Pokestop, gym, or place a rare Pokemon in that location.  Just look at the company’s partnership with McDonald’s.

Take-aways:

  • Pokemon Go’s launch and success have resulted in multiple legal concerns: injury liability, trespass, intellectual property and arbitration rights
  • Niantic’s Privacy Policy allows for all collected information to be sold to third parties
  • The collected information has the potential to change the way we advertise – providing real-time advertisements and increasing sales through the game itself

This article was co-authored by: Irene Wong

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