LAID-OFF SENIOR EMPLOYEES CAN POSE A RISK FOR COMPANIES.

The pandemic and extended lockdown forced many employers to make difficult decisions, laying off workforce, changing employees' duties and enforcing temporary or permanent pay reductions. Such cost savings have left a trail of unhappy employees. Many have already claimed constructive dismissal, while others have decided to bide their time, with many court actions ahead when employees realize they will never be called back, or that their employers had called it a “layoff ” but had no intention of ever recalling them. Relative to their junior counterparts, disenchanted senior employees pose a greater risk. They often have access to trade secrets and command influence over their colleagues. Such an employee can lead to an exodus of colleagues, clients, and confidential information. In those instances, employers must seek judicial intervention: swift action and an injunction motion — a pincer manoeuvre to stop conspiring colleagues in their tracks.

Such injunctive relief relies upon employees' legal duty to their former employers that continues long after their resignation or termination. All employees have an implied legal duty to maintain confidentiality both during and after employment. In some cases, in addition to an employee's duty to keep confidences and secrets, an employment agreement will contain non-solicitation, non-competition and additional confidentiality covenants.

Key senior employees have additional fiduciary obligations. These include a prohibition on soliciting customers, usurping business opportunities and using confidential information for personal gain. Resignation or termination does not automatically extinguish those obligations and employers can rely on them to prevent previous employees, armed with confidential information, from actively competing with it.

Argus Employee Benefits Ltd. and Leipert Financial Group discovered that their former employees Shirley Reiter and Jason Moller, respectively, had both resigned on Oct. 15, 2019, and set up Elev8 Wealth Advisors Inc., which began soliciting employees and clients of their former employers. The exodus of employees to Elev8 included four Argus employees with highly confidential client information. Argus and Leipert sought a court order to prevent Reiter and Moller from communicating with or soliciting clients. The court found that both were sufficiently senior to warrant fiduciary obligations, and both had breached them. The court prevented them, for a period of three to nine months, from soliciting clients of Argus and Leipert for whom they were agents of record; also from soliciting employees of their former employers.

Communications initiated by the clients themselves were not prohibited. In the court's Nov. 29, 2019, judgment, it decided that a prohibition against all forms of communication was not reasonable as clients are entitled to take their business where they please.

I anticipate courts receiving an increasing number of cases involving employees conspiring with colleagues, misappropriating confidential information, and soliciting clients in the wake of a sense that their employers have not been fair to them. It is vital for employers to act swiftly when that occurs. Delay will result in a loss of competitive edge and can be legally fatal to an injunction application. Employers should draft enforceable non-solicitation and non-competition covenants into their employment contracts. It is equally important to have good record-keeping, so an executed copy of the contract can be produced as required. But even in the absence of a contract, all employees have confidentiality obligations which survive termination and, for some, fiduciary obligations prevent them from competing with their former bosses.

Financial Post

Got a question about employment law during COVID-19? Write to me at levitt@levittllp.com. Some questions are edited

for clarity and space. Howard Levitt is senior partner of Levitt LLP, employment and labour lawyers. He practises employment law in eight provinces. He is the author of six books including the Law of

Dismissal in Canada.

GETTY Changes spurred by COVID-19 have disenchanted many employees. Companies should be ready for swift action if unhappy senior staff lead an exodus of workers or clients.