The Alberta Court of Appeal recently released a decision that clarifies when an employee will owe a fiduciary duty to their employer. One of the issues before the Court was whether an employee owed his employer (TSC) an obligation not to solicit the employer’s clients after the employment relationship ended. The case involved a sports agent (Evans), employed by TSC to develop and nurture relationships with hockey players recruited from Slovakia and the Czech Republic. Recruitment of these players was done primarily by two of TSC’s contacts in Europe. After six years with TSC, Evans left to start his own agency. Prior to doing so, Evans discussed his departure with the two European contacts and began negotiations to have them join his new agency. These contacts then helped induce TSC’s clients to join the new agency.
Following his departure, a number of TSC’s player clients left the agency and joined Evans’ agency. While the relationship with the European contacts eventually failed and they returned to TSC, many of the players recruited by those contacts remained with Evans at the new agency. The trial judge found that Evans had breached both the restrictive covenant in his employment contract and his fiduciary duty to the employer by inducing employees and clients of TSC to join his agency. The trial judge awarded damages in the amount of $207,463 for both breaches, finding that they were identical and overlapped.
The Court of Appeal disagreed that the restrictive covenant had been breached, finding that, because it could be read as restricting Evans from soliciting past clients of TSC, it was unreasonable and therefore unenforceable. However, this did not affect the award of damages because Evans had breached his fiduciary duty. The Court agreed with the trial judge that the test was whether the employee had some discretion or power, that they could unilaterally exercise that power or discretion to affect the employer’s interests, and that the employer was vulnerable to that power. In this case, Evans was entrusted with the development of Czech and Slovak players with little or no supervision, he used that power to solicit the clients for his own benefit, and this left TSC vulnerable to Evans’ actions.
The Court also noted that the status of a fiduciary does not require that the employee hold a particular position, but rather, that the responsibilities entrusted to the employee dictates their status. The Court compared Evans’ actions to that of appropriating a corporate opportunity, because he had diverted players away from his employer for his own benefit. While fiduciary employees are allowed to compete with their former employer, they must wait for the former clients to come to them on their own initiative. Finally, the Court suggested that where an employer terminates the relationship, an employee may continue to have ongoing fiduciary obligations.