Restrictive Actions Against Former Employees in Alberta: Brief Discussion

Employers in Alberta need to be careful when seeking injunctions against former employees. It is a high bar to establish that a former employee owes a fiduciary duty even after the relationship is over. Injunctions are heavy-handed tools that Courts are not going to use lightly. In addition, interlocutory injunctions are prejudicial, meaning that granting an interlocutory injunction impairs an employee’s right to make their case at a trial as the interlocutory injunction itself leads to the supposed presumption that the employee breached their fiduciary duties.

In the Court of King’s Bench of Alberta’s recent employment law decision, 1731271 Alberta Inc v Reimer, 2024 ABKB 446 Justice Mah clarifies the criteria for determining whether an interlocutory injunction is appropriate, both in regard to determining whether a former employee owes a fiduciary duty to their employer, and determining whether the harm complained of justifies an interlocutory injunction.

The applicant, 1731271 Alberta Inc, operating as ‘Imperial Printing’, sought an interlocutory injunction against former employee Angie Reimer and her current employer, Westkey Graphics Ltd. (Westkey) Imperial Printing alleged that  Reimer, breached her fiduciary duties by soliciting its clients for Westkey, resulting in financial and intangible losses. The company sought to restrain Reimer and Westkey from soliciting its clients for one year. Reimer and Westkey on the other hand argued that Reimer was not a ‘fiduciary’ and that Imperial Printing had not demonstrated any non-compensable financial loss.

Firstly, Justice Mah proceeded to  examine Reimer’s duties and concluded that her activities when working under Imperial Printing did not rise to the level of fiduciary responsibilities. Imperial Printing argued that Remer’s title was “General Manager”, and that she occupied a high position in the company’s organizational chart. Justice Mah responded that fiduciary capacity isn’t determined by titles nor a person’s placement on an organizational chart.

Imperial Printing additionally argued that Reimer was a key employee because she directly contacted Imperial Printing’s customers, and that the scope of  Reimer’s duties included engaging in customer service and maintaining existing client relationships. Justice Mah responded by noting that knowledge of Imperial Printing’s clients does not make an employee a fiduciary, and in fact it is a legitimate entitlement of employees to use their skills, knowledge, and relationships to compete against their former employer. In other words, the mere fact that Reimer knew Imperial Printing’s customers did not result in the conclusion that – Reimer was a fiduciary to Imperial Printing. Justice Mah additionally appears to insinuate that a better example of exploitation of the employer that would perhaps lead to a finding of a breach of fiduciary duty would be if Reimer’s duty was to create new customer relationships and she chose to exploit the new customer relationships she created by redirecting these customers to Reimer’s own business. However, that was not what happened. Reimer’s duty was to maintain current customer relationships and that is what she did while she was Imperial Printing’s employee.

Imperial Printing’s evidence was also contradictory. Imperial Printing had failed to document  Reimer’s duties and responsibilities and there was no employment contract describing her duties. Imperial Printing cannot claim that Reimer was a key employee but forget to even write down  Reimer’s duties and responsibilities let alone an employment agreement. Most importantly, there was no evidence of Reimer wielding independent or unilateral power to effect Imperial Printing’s legal or practical interests. In fact, not only does Justice Mah conclude that Reimer had no such authority, he goes further to favour Reimer’s evidence to conclude that  Reimer left Imperial Printing due to feelings of helplessness, futility, and marginalization, i.e. it was in fact that lack of authority that lead. Reimer to leave Imperial Printing.

Courts will not reward a company’s failure to compete in the market, including a company’s inability to retain employees. After all, why attribute a breach of fiduciary duty to what can more easily be explained as an employer’s incompetence? Imperial Printing could not claim that Reimer had a fiduciary duty, when everything pointed to Reimer leaving Imperial Printing precisely because she was not trusted with independent authority and decision making that would evidence a fiduciary relationship.

Employers must take a good hard look at their operations, policy documents and existing employment agreements to ensure the proper records are kept, and also that their reality would support an interlocutory injunction application.  Given the unequal relationship between employer and employee, and a Court’s natural inclination to use their power to protect employees over employers,  employer must think twice before proceeding with an interlocutory injunction application.

Whether you are an employee or an employer, a combined review of employment documents, policy manuals and prevailing restrictive covenants buried in most of these documents becomes necessary when faced with or considering a potential court action. At Osuji & Smith, we have experienced employment litigation and corporate commercial lawyers to help you navigate these review.

Author: Daniel Hermann