Date: Tue, 28 Oct 2008 14:31

From: Jason Neyers

Subject: New SCC decision

Kelvin:

My reading was that the $225,000 was for losses that were suffered after the notice period:

[15] In addition, the trial judge awarded a total of $225,000 against the investment advisors for unfair competition. The trial judge held that during the 2.5 week notice period, the departing employees remained subject to their contractual duties and specifically their general duty of fidelity to RBC, which prevented them from competing with RBC during this period. She found that by competing against RBC during this period, the investment advisors, including Delamont, caused RBC losses that continued after the notice period. Specifically, she found that in the absence of this “unfair” competition, RBC would have retained 25 percent rather than 13.5 percent of its clients. Hence the trial judge made an award against all the investment advisors for 11.5 percent of RBC’s profits over a five-year period.

If that is the right view then the denial of the $225,000 makes some sense since after the notice period the employees are allowed to compete whether or not they have given notice. The SCC seems to be saying that all competition is fair unless it is illegal, a position consistent with the economic torts cases.

I am no expert in employment law but perhaps another way to view it is that the damages suffered are too remote, given that the scope of the employers’ right is only to protect them from the loss of profits that each employee would bring in during the notice period not for any other losses even if they are somehow foreseeable. This seems to dovetail with the employee's right which is limited to the loss of salary for the notice period. Just a thought.

Jason Neyers
Associate Professor of Law &
Cassels Brock LLP Faculty Fellow in Contract Law
Faculty of Law
University of Western Ontario
N6A 3K7
(519) 661-2111 x. 88435

Kelvin F.K. Low wrote:

This is a somewhat belated follow-up to Jason's e-mail.

I am curious as to what colleagues think about the unanimous dismissal (by both the Supreme Court and the Court of Appeal) of the trial judge's award of $225,000 for loss of profits against the other investment advisors due to unfair competition during the notice period that should have (but was not) given. According to the majority, this is because once an employee terminates his employment, he is free to compete with his former employer. But that is surely only true if he lawfully terminates his employment.

If (as here), the court decides that the employment has not been properly terminated (because reasonable notice had not been given), surely the employee is not free to compete. Wouldn't he simply be in the same position as an employee who competes without purporting to terminate? I wonder how the $40,000 award made on the basis that the employees should have contributed to revenue during that period can be consistent with the dismissal of the $225,000 award for losses caused through action taken during that period inconsistently with the contract. Either the employee was obliged to continue in employment during that period or he wasn't, right? Or am I missing something? Can an employment contract with a notice requirement be properly terminated by an employee without giving notice, or by giving a shorter period of notice than contractually required? Because surely the same result should follow whether the notice period is implied or express. If so, why?

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