Non-Solicitation and one man's lucky day
One of the skills lawyers sell is their ability to predict what will happen in a court room in a particular case. Because the justice system usually works we often can. But there are some decisions by courts that make you wonder why you even try.
A man we will call Robert had been securely employed as a fire inspector for a private company for 8 years. Robert was approached by a competitor who offered him a significant raise. Robert accepted the offer by signing back a hiring letter and he advised his employer that he was resigning. The day before he was to start his new job he was presented with an non-solicitation agreement with his new employer. The agreement indicated that during his employment and for 12 months after he left his employment, he would not attempt to entice away any other employees to leave the company. He was told that if he didn’t sign it he could not start work the next day.
Given that he had already resigned from his old job, he did the smart thing and signed.
Just before he started working for his new employer, Robert had a conversation with a friend of his in which they discussed the idea of starting their own fire protection business. During the first few months of his employment with the new employer, he paid somebody to create a logo for that business and his friend incorporated a numbered company. About 3 months after he started the new job, he spoke to a colleague twice about the idea of opening his own fire protection business and suggested that that colleague might want to join him. No formal offer of employment was made.
When the employer found out that Robert had had this discussion with a fellow worker, it terminated his employment without notice. Robert sued for wrongful dismissal. He said that he had done nothing that warranted his termination without notice. What do you think the judge decided?
There were three core issue: 1. Was Robert induced away from his old employment by the new employer? 2. Was the agreement he signed the day before he started binding? and 3. Was there just cause for terminating Robert without giving him any pay in lieu of notice?
Clearly, Robert was induced away from his old employment. Both parties thought it was a long term arrangement and Robert was approached by the new employer. That meant that if there was not just cause for Robert’s termination, the judge would take into account his previous 8 years of service with the old employer in considering how much to award Robert.
The judge also decided that the agreement Robert signed the day before he started not to solicit employees during or after his employment was not binding. By the time he signed it, he had already resigned from his old job and the deal was done. The employer did not have the right to change that deal at the last moment by making Robert sign another agreement.
The last issue, however, was the crucial one. Was Robert’s behaviour sufficiently outrageous that the employer was entitled to terminate him without notice? Rather surprisingly, the judge did not think so.
The judge found that Robert’s discussions of starting his own company were vague and hypothetical. The judge decided that his discussing his hypothetical plans with a fellow employees did not constitute a breach of his obligation of good faith towards his employer. The judge noted that the employer did not suffer any financial loss as a result of these discussions.
Of course, one might conclude that the only reason the employer did not suffer a financial loss by losing employees is because they fired Robert promptly when he started soliciting their employees. They got him out of the workplace before he could do real damage.
The fact is that whether or not an employee has signed a contract agreeing not to solicit fellow employees to leave their employment, they have an obligation not to do that. Clearly, a major asset of any business is its employees. An employee who is trying to convince others to leave is working directly against the business interests of the employer.
The judge’s decision in this case is tantamount to saying that the employer was obliged to wait until Robert had actually left and recruited an employee before it did anything. Of course, there would be nothing left to do if Robert had already left with half the staff.
Frankly, to most employment lawyers, the idea that an employee could design a logo for a competing company, incorporate that company and then speak to a colleague twice about the idea of that colleague leaving for the new company…and then be found entitled to reasonable notice of his termination, is quite stunning.
All I can say is that this was Robert’s lucky day.
Robert was awarded 5 months pay in lieu of notice despite his behaviour and the employer was ordered to pay a significant part of his legal costs.
It would be nice to be able to assure my readers that justice always prevails in the courtroom. The fact is that in the vast majority of cases, it does. That, however, is probably not much comfort to Robert’s former employer.
The employer, quite appropriately, has appealed this decision so for now, I will leave Robert’s story with the words, “To be continued….”
As published in The Hamilton Spectator, June 23, 2007.