July 7, 2004

Fiduciary duties

Question: When an employee leaves a company in Ontario , if he has not signed a confidentiality agreement, does he still owe a fiduciary duty to the ex-employer?

Answer: The Ontario Business Corporations Act outlines the fiduciary obligations that directors and officers of a company owe to their corporation. But an evaluation of the case law demonstrates fiduciary duties are not limited to directors and officers of corporations. An employment relationship is elevated to a fiduciary level when an employer places his trust and confidence in an employee on a regular basis and relies on that employee in making business decisions that affect the organization.

It is not an employment contract per se but the employee’s privileged position that disentitles him from making unfair use of the information acquired in the course of his employment for the benefit of the former employee.

The difference in duty between a fiduciary employee and a regular employee leaving a company is the fiduciary employee is barred completely from soliciting clients of the former employer.

Because the fiduciary employee’s natural business advantage over the ex-employer, from knowing trade secrets and having established relationships with clients of the ex-employer, the reasonable period of non-solicitation is determined to be six months to one year.

Peter Israel is the senior partner in the Toronto law firm of Israel Foulon LLP – Employment and Labour Lawyers. He can be reached at 416-640-1550 or pi@israelfoulon.com. A version of this article originally appeared in the Carswell publication, Canadian Employment Law Today

LEGAL DISCLAIMER: This article is for informational purposes only and is not intended to provide legal advice, which in all circumstances must be tailored to the specific facts of any problem. You should obtain a proper legal consultation in order to determine how this article applies to your specific situation.
Please feel free to contact Israel Foulon LLP to learn more at 416-640-1550.

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