Departing Employees Face Consequences
An Ontario employer has recovered almost 20 million dollars from four former employees.
The GasTOPS v. Forsyth case is one that we have mentioned in our client conferences and that we have been watching for a few years.
GasTOPS sued four former senior management employees when they resigned their employment on two weeks notice. The Trial Judge found that within hours of the resignation, the employees had met with other GasTOPS employees with a view to setting up their own competing business. Once the new business had been established, the employees pursued "virtually every existing and potential" GasTOPS customers using missapropriated confidential information. The former employees had significant success with their new business.
The Trial Judge found that the employees had breached their fiduciary duty to GasTOPS in a number of ways including, by “leaving without giving reasonable notice knowing other employees would follow, with devastating effects on GasTOPS”, “soliciting customers”, and “using GasTOPS’ confidential information to compete unfairly” with it. Further, the employees had breached their duty of confidentiality by misusing confidential information to advance themselves to the detriment of GasTOPS. Finally, the employees breached their employment agreements by leaving without reasonable notice.
The Trial Judge awarded damages in the amount of $12,306,495 based on an accounting of profits over a 10 year period, plus pre-judgment interest of $3,039,944.00 and costs in the amount of $4,252,920. He refused to grant a permanent injunction prohibiting the employees from using the confidential information.
The Ontario Court of Appeal upheld all aspects of the trial decision.
This case confirms that departing employees who breach their employment obligations may face consequences. The difficulty for employers is to prove damages that make the costs and risks of litigation worthwhile.
confidentiality damages departing employee fiduciary duty GasTOPS injunction notice Ontario Court of Appeal reckless conduct