Given the power imbalance between parties to an employment relationship, the legislation and courts have been clear that employers have specific obligations to fulfill towards their employees. For instance, employers must provide reasonable notice or pay in lieu of notice if they terminate an employee. Employers must also meet minimum standards set out in the legislation, including for hours worked, vacation pay, etc. Similarly, employees owe their employers certain duties as well, including the duty of good faith, loyalty, and fidelity. Employers and employees must clearly understand these duties and how they might be breached.
In this post, we will discuss what is included in an employee’s duty of good faith, loyalty, and fidelity. In particular, we will discuss how these duties are related to competition and confidentiality. The employee’s duty of good faith, loyalty, and fidelity can also be held after the employee has resigned or has been terminated. We will also discuss a case example, Titus v. Hack, 2024 ONSC 3666, highlighting how these duties may be breached. This post will provide key takeaways for employees to understand what obligations they must uphold towards their employers. Employers can also benefit from the insights of this post as it discusses when an employee’s behaviour may lead to a breach of the duty of good faith, loyalty, and fidelity.
What is included in an employee’s duty of good faith and loyalty?
An employee’s duty of good faith, loyalty, and fidelity includes a range of behaviours. Generally, the employee is expected to be loyal to the employer while working with them. Even after employees leave, they are expected to maintain certain confidentiality requirements.
Competition
While employed, employees are not permitted to compete directly or indirectly with their employer. Since employees must be loyal to their employer, they are not permitted to work with their employer’s competition or provide confidential information to assist the employer’s competitor. Even if the employment relationship has soured, the employee must ensure they still fulfill their duty of loyalty.
It is important to note that while the employee cannot compete with their employer while still employed, they can take preparatory steps to secure a new role. This may be the case if the employee becomes aware of facts that would lead them to want to search for a new job, such as if they know the employer’s finances are diminishing and there may not be enough work to keep the employee at the company. If the employee is taking preparatory steps, then these would not be considered active competition against their existing employer.
Confidentiality
Employees must maintain confidentiality of company documents, financials, and other trade secrets. This is part of an employee’s duty of good faith, loyalty, and fidelity. Terms for confidentiality of company documents are often set out in the employment contract or in policy guidelines that the employees have agreed to during the course of their employment.
Notably, employees are also required to maintain the confidentiality of company documents even after they leave the company, whether through termination or resignation.
Employees are also prohibited from deleting their employer’s documents during or after employment. This may be set out in the employment contract and company policies. If an employee deliberately deletes certain company information, this may be considered a destruction of company policy, which may lead to damages to be paid by the employee. When an employee is leaving a company, it is important to clarify their obligations with respect to company documents and ensure they are maintaining the confidentiality and proper record-keeping of these documents.
Even if an employee uses a personal laptop for work, it is important to ensure they are handling company information properly so as not to breach their duty of good faith, loyalty, and fidelity when they leave the company.
Employee Breaches Duty of Good Faith By Keeping Company Documents
In the Titus case, the court found that the employee had breached their duty of good faith, loyalty, and fidelity after improperly handling company information upon his resignation.
The employee worked as vice president of the company. His role involved being a salesman, and he worked closely with the company’s owner.
The court found that the employee did not breach his duty of good faith, loyalty, and fidelity by competing with his employer. The employee began receiving less income as time went on. His relationship with the owner was also tense, as he felt he was not included in client discussions.
The employer claimed that the employee had solicited one of their supplies and one of their customers. However, the only evidence was that the employee had attended meetings and business trips with these parties on business for the company and not solicit them. The court found that the employee was only engaged in active competition after he resigned.
Despite this, the court still found that the employee had breached his contractual duties of fidelity, loyalty, and good faith because he had copied the company’s business records before resigning. He also deleted these records from the employer’s computers while keeping a copy for himself. The employee also shared this information with a competitor despite claiming that he had returned all the information. Despite this, however, the employer could not provide any evidence that the documents contained confidential information other than two of the documents or that it suffered a loss due to the two documents being shared.
The employee had a work desktop and a laptop he purchased for his own use, which the company reimbursed him for. The company’s IT consultant found that certain information on the desktop was missing, as was some information from the customer database. The employee admitted that he had used a program to wipe his personal data from the laptop and had backed up some corporate data, which he had taken home with him. He would not bring this backed-up information home with him, as he was resigning.
The court found that the employee breached his post-employment obligations, including his duty of loyalty, fidelity, and good faith.
Contact Haynes Law Firm in Toronto for Advice on An Employee’s Duty of Loyalty and Employment Agreements
Generally, employees owe their employer a duty of loyalty as an implied term of the employment agreement. This involves ensuring they are not working for a competitor or soliciting the employer’s customers during the employment relationship. As this will depend on the specific circumstances of your case, our experienced employment law legal team at Haynes Law Firm in Toronto can assist you with issues that arise from employment contracts. For employees, our goal is to ensure that they understand their rights and obligations under the employment contract. Haynes Law Firm also assists employers in avoiding liabilities that may arise from employment contracts and policies that do not adequately meet legislative standards. We are dedicated to finding the best resolution for you.
To book a consultation, please contact us online or by phone at 416-593-2731.
