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ORDINARY VS KEY EMPLOYEES

Posted On: June, 08 2015

Distinguishing at law between an ordinary employee and a key employee who owes an employer fiduciary dutiescan be challenging at the best of times. In his decision in Optilinx Systems Inc v Fiberco Solutions Inc, 2014 ONSC 6944 Justice Perrell provided some additional guidance in making this important distinction.

In this case, the plaintiff, Optilinx, brought a motion seeking to restrain two former employees from working with its clients for a period of one year following their resignation from the company. Optilinx conceded that one of the two employees was not a key employee but assisted the other employee, Mr. Foresta, in breaching his alleged fiduciary duties.

Justice Perrell dismissed Optilinx’s motion on the basis that there was no prima facie case that Mr. Foresta was a key employee who breached his fiduciary duties.

Justice Perrell’s decision in Optilinx reaffirms the factors relevant to determining whether an employee owes a fiduciary duty to their employer. Justice Perrell states that just because Mr. Foresta was a very productive employee, or even the “lynchpin to Optilinx’s success” (see paragraph 33) does not mean he was a fiduciary. Specifically, Justice Perrell highlights that Mr. Foresta did not have any hiring authority, he did not carry out any management or administrative functions like business or financial planning, and he was not a director, officer or owner of Optilinx. Without a non-competition clause in the employment agreement, Justice Perrell confirmed that fiduciaries, like ordinary employees, are not prevented from accepting work from former clients. On the facts in Optilinx, there was no evidence that Mr. Foresta directly solicited any of Optilinx’s customers.

Though Justice Perrell did not make a final determination on whether Mr. Foresta was a fiduciary, his observation that Optilinx failed to show a strong prima facie case that Mr. Foresta was a key employee is important to employment law.

Many employers have employees who are a significant asset to their bottom line. Justice Perrell’s observations reaffirm the reluctance courts have in restraining persons from carrying on in their fields of expertise after parting with an employer. Employers that have serious concerns about competition from former employeesshould have non-competition and non-solicitation clauses included in their employment agreements. Without such contractual protection, employers gamble on the narrowly construed protections afforded by the common law.

 

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