Background:
Imperial Printing, a printing company based in Edmonton, faced a legal challenge when a long-time employee resigned and moved to a competitor, Westkey Graphics. The company claimed that the employee had breached her fiduciary duty by soliciting clients after her departure, resulting in financial harm. The company sought an interlocutory injunction to prevent her from soliciting clients for a year.
The Employee’s Role and Exit:
The employee had worked at Imperial since 1999, gradually taking on roles in scheduling, estimating, and client interactions. Despite her extensive experience and critical knowledge of the business, she did not hold a formal fiduciary role and had no written restrictive covenants.
In 2020, Imperial was sold to a new owner under the Rayacom Group. The employee was offered a position with the new company, continuing in a similar role. However, in 2023, dissatisfaction with management led the employee to resign in February 2024, giving two weeks’ notice. During this period, she trained her replacement remotely. Shortly after her resignation, she accepted an offer from Westkey Graphics.
The Alleged Breach:
After joining Westkey, the employee emailed former Imperial clients, informing them of her new role. Although she did not actively solicit new business, some clients expressed interest in working with Westkey. Imperial’s owner believed the emails amounted to solicitation and filed for an injunction, claiming that the employee’s actions caused financial harm by enticing clients away.
Legal Arguments:
Imperial argued that the employee was a fiduciary because of her long tenure, her client-facing role, and her extensive expertise. They claimed that she improperly used her position to attract clients to Westkey, violating her duty of loyalty.
The employee and Westkey contended that she was not a fiduciary, as she did not have the decision-making authority required for such a role. They further argued that any losses Imperial incurred were either self-inflicted or compensable through damages.
Court’s Decision:
The Alberta Court of King’s Bench found in favour of the employee, dismissing Imperial’s application for an injunction. Key points in the ruling included:
- Fiduciary Duty: The court found no evidence that the employee had exercised significant decision-making authority or had the power to bind Imperial. Her duties were primarily administrative and carried out under the direction of management. The court emphasized that knowing clients or having relationships with them does not automatically make an employee a fiduciary.
- Lack of Client Solicitation: While the employee had contacted former clients, the court determined there was insufficient evidence of solicitation. The employee’s actions did not meet the threshold of a fiduciary breach.
- No Irreparable Harm: The court also found that any potential financial losses were quantifiable and compensable in damages, meaning the injunction was unnecessary. Furthermore, the court noted that granting the injunction would interfere with consumer choice in a competitive market.
Takeaways:
This case highlights the importance of clearly defining fiduciary roles within a company and documenting any obligations during the course of employment. Imperial’s failure to demonstrate that the employee had fiduciary duties or exercised significant decision-making authority weakened its case.
For businesses, this case serves as a reminder of the need to establish clear agreements and to carefully assess the roles of key employees to avoid future disputes over fiduciary duties.
Source: 2024 ABKB 446 (CanLII) | 1731271 Alberta Inc v Reimer | CanLII
