Lower-level staff don’t have the same fiduciary obligations when they leave

Eastside Chevrolet Oldsmobile Ltd. v. Richmond Hill Pontiac Buick GMC Ltd., 2004 CarswellOnt 2368 (Ont. S.C.J.)

Eastside Chevrolet Oldsmobile Ltd. is a car dealership in Toronto. It filed an action against three former employees and the company they later worked for, Richmond Hill Pontiac Buick GMC Ltd., claiming the employees had signed a confidentiality/non-solicitation employment agreement and were in any case bound by a common-law duty of confidentiality to their former employer.

The three defendants were employed as a car salesman, a contract administrator and in the service department of Eastside Chevrolet respectively. The salesman had made a record of his customers’ names and addresses and after he moved to Richmond Hill Pontiac he mailed out letters soliciting his old customers.

The two former employees, who had also moved to Richmond Hill Pontiac, were mentioned in the letters. In rejecting Eastside Chevrolet’s claim, Justice Paisley of the Ontario Supreme Court of Justice found there was no basis for concluding the three defendants had acted in concert when they left their former employer. They had signed a confidentiality/non-solicitation employment agreement, ruled the court, but it agreed with the defendants’ counsel that the agreement was unenforceable as there was no consideration for the agreement.

Justice Paisley cited the decision in Kohler Canada Co. v. Porter, which held that “continued employment, without anything more of value passing to an existing employee, is not consideration for a new promise disadvantageous to the employee.”

While Justice Paisley noted a former employee is not entitled to make “unfair use” of information acquired while employed, but added this for the most part doesn’t apply to lower-level employees. They may with impunity take to a new place of employment the skills and general knowledge of the conduct of the business. A director or officer of a very senior managerial position has an intimate knowledge of the employer’s operations, but the assumption is that an employee is not a fiduciary unless special circumstances exist.

Justice Paisley said there was no irreparable harm done to Eastside Chevrolet. The defendant has sold 18 vehicles to “old” customers. This does not amount to a significant loss of market share of new car sales in the metropolitan Toronto area, the court ruled.

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