EF Institute for Cultural Exchange Limited v. WorldStrides Canada, Inc.: Employee considering future employment with a competitor

Author: Makenzie Johnston

The Ontario Court of Appeal recently upheld a motion judge’s decision to summarily dismiss an employer’s claim against its employee, whom the motion judge determined had not breached the non-competition and confidentiality clauses in his employment agreement in the course of negotiating a new position of employment with his former employer’s competitor.

The employee, David Conklin, began his employment with EF Institute for Cultural Exchange Limited (“EF”) in May of 2005. Mr. Conklin was later promoted to the position of President, and subsequently signed an employment agreement containing confidentiality and non-competition clauses restricting Mr. Conklin’s ability to compete with EF for a period of one year post-termination. Following Mr. Conklin’s dismissal in September of 2014, he negotiated a severance package with EF, the terms of which required compliance with the non-competition and confidentiality obligations contained in his employment agreement.

In April of 2015, within Mr. Conklin’s contractual non-compete period, he submitted a resume and attended an interview with WorldStrides, a competitor of EF. In June of 2015, WorldStrides verbally offered Mr. Conklin a position. Mr. Conklin accepted the position, with his employment scheduled to start after expiry of the non-compete period. Mr. Conklin commenced employment with WorldStrides one day following expiry of the non-compete period.

EF alleged that Mr. Conklin breached the non-compete clause and confidentiality agreement by engaging in interviews and negotiations culminating in an offer from WorldStrides before the expiration of his non-compete period. EF also sued WorldStrides for inducing Mr. Conklin to breach his ongoing contractual obligations. Mr. Conklin and WorldStrides successfully had the claims summarily set aside. EF appealed the summary judgment decision.

The Ontario Court of Appeal considered, among other things, the narrow issue of Mr. Conklin’s non-compete obligations in the context of preparing for future employment with a competitor, which includes the requirement to maintain confidentiality during the recruitment process.

In their endorsement of the motion judge’s decision, the Court of Appeal found the evidence of Mr. Conklin’s dealings with EF did not amount to any breach of confidentiality by Mr. Conklin in the context of his non-competition obligations. Mr. Conklin’s resume referenced his personal achievements while employed with EF, which included the disclosure of sensitive financial information. However, the same financial information was generally available to the public online. Further, there was no evidence that Mr. Conklin was linked to WorldStrides’ business decision to launch a “Vimy Ridge” campaign that directly competed with the campaign launched by EF. The motion judged concluded this was “a logical, if not obvious, decision given the existence and success of the 95th anniversary tours to Vimy Ridge”.

With regards to Mr. Conklin’s fiduciary duty, the Court of Appeal upheld the motion judge’s reliance on the principles articulated in the Guzzo v Randazzo, 2015 ONSC 6936 decision, in relevant part:

[27]        I also find there was no breach of any fiduciary duty on the part of David Conklin in his dealings with WorldStrides prior to September 30, 2015.  In this regard, I rely on the circumstances that arose in Guzzo v. Randazzo, 2015 ONSC 6936 (at paragraphs 167-194).  In this regard, a meeting with a [prospective] future employer that is a competitor is not, on its own, a breach of any fiduciary duty. Here, the existence of the confidentiality obligation on David Conklin was not only disclosed but precisely set out by the forwarding of its terms to WorldStrides as part of the recruitment process.

Accordingly, the Court of Appeal upheld the motion judge’s conclusion that Mr. Conklin’s sharing of non-sensitive information did not breach his fiduciary duty owed to EF.

Takeaways

This Ontario appellate authority suggests that employees may negotiate employment positions with direct competitors of their current employer before the expiration of their contractual non-compete clause; however, this ability is not necessarily unrestricted. Employees must review the terms of their employment agreement and any applicable confidentiality or non-compete obligations to ensure they do not breach these obligations during the interview and negotiation stage with the prospective new employer. This case also acts as a stern reminder to employers that positive evidence is required to validate claims that a departing employee has misused confidential information.

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