Milton Verskin

 

barrister and solicitor

practicing in Toronto, Ontario

3.1 Foul Whisperings Abroad: The Public Interest and an Employee’s Misuse of Confidential Information

 

           Situations arise in which keeping a confidence may prejudice other values such as protecting health or safety, preventing injustice and preserving the freedom of the press.  The duty to keep a confidence gives way to a competing value only if good reason is demonstrated.  To illustrate this, contrast two cases.

 

           The first is Lion Laboratories v Evans.

 

           Lion Laboratories manufactured an electronic device called an intoximeter which measured a driver’s level of intoxication.  The measurements were used as evidence in criminal prosecutions.  However, Lion Laboratories had some confidential documents which indicated that this device was possibly unreliable and they kept this information secret.

 

           Two disloyal employees made copies of these documents and gave them to a newspaper.  Lion Laboratories sought to restrain the newspaper from making use of the confidential information and the newspaper pleaded that it was in the public interest to publish it.

 

           The court said that to encourage an employee’s loyalty to his employer is a public interest that will be outweighed by a competing value only in exceptional circumstances.  This was such a case, because it is a matter of the utmost importance to disclose the risk that people might well be punished for offences which they did not commit.

 

           The newspaper was therefore allowed to publish the information and was not required to pay any damages.

 

           In Schering Chemicals Ltd v Falkman ltd and Ellstein the situation was a little different.

 

           Learned journals and the media had suggested that use of the drug Primodos as a pregnancy test on women already pregnant might permanently damage the unborn children.  When some of the children were born with physical defects, actions were instituted on their behalf.

 

           Schering Chemicals, the manufacturers of the drug, withdrew it from the market and engaged Falkman Ltd and Ellstein to train some of its executives to speak effectively on television and radio to repudiate the criticism which was being levelled against them.

 

           After the training was over, Elstein produced a film on the subject for the television.  He used only information which was already available to the public.  Nevertheless, Schering Chemicals applied successfully to court for an order preventing the showing of the film.

 

           What was the difference between the two cases?

 

           In the Lion Laboratories case the newspaper wanted to publish something which was of current concern.  Drunken drivers had an interest in knowing whether their level of drunkenness was being correctly assessed.  In the Schering Chemicals case, on the other hand, the issue was no longer of current concern because the drug had already been withdrawn from the market.

 

           In summary, then, an employee’s duty to keep a confidence is overborne only in exceptional circumstances and provided that some good can come from breaking it.  What decides whether circumstances are exceptional or not is a matter for judicial discretion which one may try to predict by studying previous cases.

 

 

3.2 Leaving Job to Compete with Former Employer

 

           Usually an employee is allowed to leave his job and compete with his former employer.  In doing so, however, he must refrain from using his former employer’s confidential information and from breaching the terms of his employment contract.

 

           But if an employee occupies a special position of trust, if he occupies a fiduciary position, he will not even be allowed to compete with his former employer, at least for a limited time.

 

           And the employee’s duties are not ordinarily diminished but the fact that the employer has treated him badly.

 

           The legal principles involved are best understood by reference to an example.

 

           Canadian Industrial was a company which distributed industrial nailing and stapling equipment to customers across Canada.

 

           Mr. Dargue was the manager of its Central Region.  This was a very senior, responsible job.  He hired and fired staff and they reported exclusively to him.  He decided what products to sell and was deeply involved in securing suppliers.  Together with the president, he made important decisions about products which set the future course of the business.

 

           At first, the atmosphere in this company very good.  Then tensions developed.  Dargue and five other employees, his Five Henchman, were treated very badly and they make plans to leave.

 

           While still working for the company, Dargue offered to buy a competing company called Mekfast.  He gave Canadian Industrial notice of his intention to resign and a few weeks later the Five Henchman did the same.

 

           They used their remaining time with the company to approach its suppliers, some of them exclusive suppliers, and asked if these suppliers would be willing to sell goods to them at their new company.

 

           Then, once they had resigned and taken up their new jobs, they approached Canadian Industrial customers and diverted orders to their new company.

 

           Canadian Industrial sued Dargue for damages.  The case depended on the nature of his position.  If he had been an ordinary employee, his conduct would have been regarded as being for the most part blameless.  He could be liable only if his position had been a fiduciary one.

 

           The judge analysed the details of Dargue’s obviously senior and responsible position and said that his “experience and authority, and the trust and reliance of his employer, imposed on him the mantle and the responsibilities of a fiduciary.”  Dargue’s was therefore a fiduciary position.  This meant that he owed Canadian Industrial special duties of loyalty, and therefore he should not have approached their suppliers or customers, not while he was still employed by them and not for some time after he left them.

 

           And what about the Five Henchman?

 

           They had been more junior employees and had not occupied fiduciary positions.  In the ordinary course of events, they would have been entitled to join a competing company and to approach their former employer’s suppliers and customers (as long as, in doing so, they did not make use of confidential information).

 

           However, in this case, they had made themselves a party to everything which Dargue had done, knowing the fiduciary nature of Dargue’s position with Canadian Industrial, and they were therefore made liable together with him for damages.

 

           There seems to be an element of injustice in this case, arising from the fact that Canadian Industrial had treated Darge and the Five Henchmen so badly.  The judge went so far as to describe some of the company’s behaviour as “reprehensible.”  Nevertheless, this is what he said:  “The law imposes duties on the employee with respect to the performance of his or her duties until departure, the manner in which the departure is accomplished, and the conduct of the employee after the departure.  These legal duties must be complied with, no matter how unhappy the employee is.”   In other words, however much the judge felt sympathy for these unhappy employees, they could not raise the bad treatment which they had suffered as an excuse for ignoring their legal duties to their employer.  Even if he is badly treated, an employee must not misuse confidential information or breach fiduciary duties.

 

           When considering whether or not to compete with a former employer, it is usually best to spend a little time consulting a lawyer.  We recommend Milton Verskin.

 

 

3.3  What is Wrongful Dismissal?

 

           No employment relationship is permanent.  Your employer is always entitled to dismiss you.  He does not need a reason to dismiss you.  He can tell you to go simply because he would prefer to give your job to his best friend's daughter, even though you have twenty years of experience and she has just come out of school.

 

           However, your employer must give you reasonable notice of termination.  This means that he must allow you to continue working with full salary and with full benefits for a reasonable time while you look for another job.

 

           Your employer may not want you to work while you know that you are soon to leave.  He may feel that you loyalty will be diminished and that you might harm his business.  If that is how he feels, he is entitled to tell you to go immediately.  But if he does that, he must give you a payment in lieu of notice. He must give you the full salary and full benefits which you would have earned if you had worked for him during your notice period.

 

           What notice period are you entitled to?

 

           At the very least, you are entitled to get one week's notice for every year that you worked, up to a maximum of eight weeks.  That, however, is bare minimum.  In most cases, you are entitled to get very much more.

 

           You are entitled to reasonable notice. What is reasonable notice depends on many factors.  It is not something which you can calculate and different people can have different opinions as to what is reasonable.  If you understand the kind of factors which a judge considers, you can make an educated guess as to what a reasonable period of notice is likely to be in your own particular case.

 

           The longer you have worked for the same employer, the longer your notice.  The more senior your position, the longer your notice.  The older you are, the longer your notice.  The more difficult it is to find similar employment, the longer your notice. And the list goes on.

 

           If your employer lured you away from another job, you will also be entitled to longer notice.

 

           What happens if your employer is in financial difficulties and he warns you that it is possible that he may have to close down?  What if he advises you, in your own interests, to try to find another job?  When eventually he finds that he has to close down and he tells you to leave, the fact that he warned and advised you will be a factor which will shorten your notice period.

 

           A wrongful dismissal takes place when your employer tells you to leave and he fails to give you the correct period of notice or the correct payment in lieu of notice.

 

           When you are dismissed, and your employer offers you a termination package, it is usually advisable to consult a lawyer before accepting it.  Very many termination packages are too small.  Likewise, an employer who wishes to terminate the services of an employee would be well advised to discuss the course of action in advance with his lawyer.  The only question which remains to be answered is: which of the two, the employer or the employee, will be fortunate to engage Milton Verskin as his lawyer?

 

 

3.4  How to Calculate an Employee's Notice Period or Payment in Lieu of Notice

 

           Imagine the following facts.  Ms. W is about 58 years old.  She worked for the XYZ Company for about 6 years.  She worked as an accountant earning about $60,000, her position being a professional one involving a fair amount of responsibility

 

           The period of working notice, and hence also the payment in lieu of notice, depends on an open list of factors, the most prominent of which are the length of service, the age of the employee, the level of responsibility involved in the job, and the difficulty which she might experience in finding other employment.  The longer the service, the older the employee, the higher the level of responsibility, the more difficult it is to find another job, the longer the notice period.

 

           The decided cases are not consistent.  Also, the facts differ drastically from case to case.  Consequently, decided cases can be used only as a very rough guide.  The textbooks give schedules of cases, showing the job title, the length of employment, and the employee’s age, and these schedules can be used as a very rough guide to an already rough exercise in assessing quantum.  The following cases have some relevance to Ms. W's position.

 

A. Cases in which the Award might be Greater than what is appropriate for Ms. W

 

Meyer v MSA Motors [1987]: Dealership Accountant, 46 years old, worked for ten years  -  awarded 12 months.

 

His service was longer than Ms. W’s which would give him more notice, but he was significantly younger, which would give him less notice. Since length of service seems to be a weightier factor than age, this case would indicate that Ms. W should get something less than 12 months.

 

 

Ellis v Prince Rupert Fisherman’s Co-Op [1991]:Funds Accountant, 63 years old, worked for 9 years  -  awarded 10 months.

 

His position seems to have been more or less on the same level as Ms. W’s.  Since he was older and worked longer, his award should be greater.  This case would indicate that Ms. W’s notice should be less than 10 months.

 

 

B.Cases in which the Award might be Similar to what is appropriate for Ms. W

 

Boldt v Davies [1997]:Chartered Accountant, 51 years old, worked for just under 8 years  -  awarded 8 months.

 

His service is much the same as Ms. W’s but he is younger, which would give him less notice.  But he was a chartered accountant, which means that his level of professional responsibility was greater, and that would give him more notice.  The case seems to indicate that Ms. W’s award should be in the region of 8 months, though possibly less.

 

 

Leahy v Western Concrete Finishes [1988]: Bookkeeper, 36 years old, worked for 12 years – awarded 9 months.

 

His level of responsibility was probably not all that different from Ms. W’s, and he worked longer, which would indicate that he would get more than she would.  But he was much younger, a factor which would make him get less.  The two factors probably cancel each other out, with the result that this case indicates that Ms. W should get 9 months.

 

 

 

C.  Cases in which the Award might be Less than what is appropriate for Ms. W

 

Niwranski v HN Helicopter Parts [1992]: Office Manager/Bookkeeper, 35 years old, worked for two years  -  awarded 8 months.

 

His level of responsibility is probably comparable with Ms. W’s, but he was much younger and worked for much less time, which would indicate that Ms. W should get more.  This case would indicate that she should get more than 8 months.

 

 

Cort v Skurka Chasson [1981]:

 

Chartered Accountant, 45 years old, worked for 1½ months  -  awarded 5 months.

 

Since he was much younger than Ms. W and worked for much less time, her award should be greater than his.  However, he was a chartered accountant.  This case tends to indicate that Ms. W should get 5 months or more.

 

 

 Rough Summary and Conclusion

 

Subparagraph [a] might indicate that Ms. W’s award might be less than 12 months and less than 10 months.

 

Subparagraph [c] might indicate that Ms. W’s award might be more than 5 months and more than 8 months.

 

Subparagraph [b] might indicate that Ms. W’s award might be as high as 9 months or something lower than 8 months. 

 

It is not possible to predict a judge's decision in such a case with any more accuracy.

 

Most cases of this sort are settled.  The employer will argue that the amount should be very much below 8 months, the employee will argue that it should be 9 months or even more, both sides will take into account that a court case will be time-consuming and expensive, and eventually, with few exceptions, they will settle at some midway point.

 

 

3.5  Constructive Dismissal: a Mean Boss

 

           What happens if your employer behaves towards you like an absolute pig and you cannot take it any more and you walk out?  That is called Constructive Dismissal  -  your employer will be treated as if she actually dismissed you, as if she told you to go. Although you walked away from the job, you can still claim your full termination pay.  You may even be able to claim better than normal termination pay.

 

           But, before you walk out, you must be quite certain that the circumstances of your case justify you, from a legal point of view, in doing so.  It is a question of deciding how bad your employer's behaviour has been and whether the law would recognise that behaviour as being bad enough to justify you in leaving.

 

           Consider an employer who uses rude and insulting language when speaking to you.  If she does it once or twice, carried away by the emotion of the moment, you would not be entitled to walk out.  But if she is consistently rude, and humiliates you, especially in front of other people, there will come a time when you can refuse to be treated in that way and you can walk out.

 

           Sometimes an employer is quite polite, but does hurtful things.

 

           She may move you out of a well-decorated, prestigious office with Group of Seven paintings and a view across the lake and put you in an uncomfortable hole, with the result that everyone in the office gossips about your loss of status and treats you accordingly.  She may push all the menial, unpleasant tasks onto you, while giving a more junior person all the nice work.  She may get picky, severely criticising your every movement  -  what you say, how you say it, what you wear, and your brand of under-arm deodorant.  She may transfer you to a different department which do not like, or reduce your salary.

 

           The question which always arises is, how much must you take?  Different people, even different judges, can have different ideas of what behaviour is acceptable.

 

           When you find yourself in such a situation, you have many choices open to you.  You may want to leave immediately, or you may prefer to give your employer a chance to improve.  You may simply want to find a way to behave which will make it easier for you to leave later.

 

           It is usually best to consult your lawyer.  Together you should work out a strategy.   You may decide to talk it out with your employer and you will want to discuss how best to do that, what to say and what to be careful not to say.  Or your lawyer might write a letter for you, or he may guide you as to how to write your own.

 

           This can be a difficult branch of the law, where decisions are not easy to make and your lawyer may well be able to help you to get out of an unpleasant situation with as little stress as possible.

 

           Note that if you are an independent contractor doing contract work for a similarly unpleasant person, similar issues may arise.  In such circumstances, too, it would be best to discuss the matter with your lawyer before taking any action.

3. EMPLOYMENT LAW