The Obligations of Ex-Employees in Quebec Employment Law

1991-01-01

THEOBLIGATIONSOFEX-EMPLOYEESINQUEBECEMPLOYMENTLAW

BobH.Sotiriadis*
LEGERROBICRICHARD,Lawyers
ROBIC,Patent&TrademarkAgents
CentreCDPCapital
1001Square-Victoria-BlocE–8
thFloor
Montreal,Quebec,CanadaH2Z2B7
Tel.:(514)9876242-Fax:(514)8457874
www.robic.ca-info@robic.com

Asinthecommonlawprovinces,theQuebeccourtshaveestablishedabulk
ofcaselawrelatingtotheobligationsofex-employeesboundby
employmentcontracts.Distinctionsaremadebetweentheobligationsofkey
personnelandlowerlevelemployees,asintheotherprovinces.However,
theseprinciplesaresometimesexpresseddifferentlyandinaccordancewith
civillawprinciples.
Arecentdecision[BTGCanadaInc.v.Baumann,J.E.90-1703(Que.Sup.Ct.)]
oftheQuebecSuperiorCourtconstitutesagoodexampleofthecivillaw
approachtointerpretingtheemploymentcontractsofkeyemployeesin
Quebec.
FactsbeforetheCourt.Intheabove-mentioneddecision,acompanycalled
BTGCanadaInc.(«BTG»)suedacertainBaumann,anex-employee.Inits
actionBTGsoughtapermanentinjunctionanddamageswithaviewto
enforcingarestrictivecovenantandtoprotectingconfidentialinformationor
tradesecretsrelatingtoitsbusiness.
BTGwasinthebusinessofmanufacturinginstrumentationforthemeasuringof
residualchemicalsdestinedforpulpbleachplants,andofspecialized
equipmentusedforpulpcontrolandmonitoring.
BaumannwashiredbyBTGonJuly1,1986.Thepartiesenteredintoan
employmentcontractthatincludedtwoenclosures,onebeinganon-
competitionagreementandtheotheranagreementincorporating
additionaltermsandconditionsofBaumann’semployment.Therestrictive

*
LEGERROBICRICHARD,1991.
Lawyer,BobH.SotiriadisisaseniorpartnerinthelawfirmLEGERROBICRICHARD,g.p.andin
thepatentandtrademarkagencyfirmROBIC,g.p.Publishedat(1991),8Business&theLaw.
14-16.Publication116.004.

covenantforesawatwo-yearperiodduringwhichtheemployeewasto
refrainfromcompetingwithBTG.
OnAugust1,1987,Baumanndecidedtoleavehisemployandgavenotice
toBTGtothiseffectonAugust10,1987.Thenoticestatedthathisresignation
wouldbeeffectiveonDecember31,1987.OnOctober2ofthesameyear,
BTGdecidedtoterminateBaumann’semploymentimmediately,insteadof
waitinguntilDecember31,1987.Thepartiesexecutedatermination
agreementconfirmingthefinancialarrangementsrelativetothetermination
ofBaumann’semploymentonOctober9,1987.
ThecourtwaspresentedwithevidencetotheeffectthatBaumann
registereda«DeclarationofBusinessName»onSeptember23,1987,inwhich
hestatedthathehadcarriedonthebusinesstobeidentifiedbythenamein
questionsinceAugust1,1987.Thenamehechoseclearlyreferredto
activitiessimilartothoseheperformedatBTG.
ItappearsalsothatBaumannwasquitecandidastohisbehaviourduringthis
period.Headmittedtothecourtthatduringtheweekinwhichhehadbeen
terminatedandsignedtheOctober9,1987terminationagreement,hehad
preparedanoutlineoftheelectroniccircuitrynecessarytodevelopa
brightnessresidualmeter.Thismeterwasdestinedtothesamemarketserved
byBTG.
Baumannworkedonpreparingaprototypeoftheapparatusin1987and
publishedabrochuretointroduceittothemarket.Thebrochureswere
printedinJune1988andsenttomanagersofpulpbleachplants.Thenames
oftherecipientswereobtainedbyBaumannfromapublicationknownasthe
1988PulpandPaperJournal.
Baumannattemptedonthreeoccasionstodemonstrateanddevelophis
apparatusbyarrangingtoinstallitonthepremisesofmajorpulpandpaper
companies,freeofcharge.Eachtimetheapparatusprovedtobedeficient.
ItwasonlyonApril24,1989,thathewasfinallyabletoclosehisfirstmodest
saleofaworkingversionoftheapparatus.
PositionofBTG.EssentiallyBTGallegedthatBaumann’sentrepreneurial
activitiesviolatedhisobligationtorefrainfromcompetingasforeseeninthe
relevantenclosure.ItalsoarguedthatBaumannwasakeyemployeeandas
suchowedBTGloyalty,goodfaithandavoidanceofconflictofinteresteven
aftertheterminationofhisemployment.

ViewoftheCourt:TheRestrictiveConvenant.UnfortunatelyforBTGits
restrictivecovenantapplied«intheeventofterminationoftheagreementby
theemployeeforanyreason».Inthelightofaclausethatrestrictedtherights
onlyofBaumannandcreatedanobligationonlyforBaumann,thecourt
interpretedtheclauseinhisfavour,inaccordancewiththeprinciplesof
interpretationofcontractsofQuebeccivillaw.Ineffect,thecourtheldthat
BTGterminatedBaumann’semploymentwhenitaskedforhisresignationon
October2,1987andsignedaterminationagreementonOctober9ofthe
sameyear.
Baumann’sstatusasakeyemployee.Quebecjurisprudencerecognizesthe
differencebetweenthedutiesandobligationsofanemployeewhose
relationshipwithhisorheremployercanbedescribedasoneof«mandate»
andthatofanemployeewhoserelationshipwiththeemployerisoneof
simple«leaseandhireofpersonalservices».
Akeyemployeeisonewhoactsasamandatary.Giventherulesapplicable
tocontractsofmandate,thecourtshaveresortedtotheconceptofdutyor
loyaltytomeasuretheobligationoftheemployeewhofallsundersucha
description.TheQuebeccourtshavefollowedtheCanadianjurisprudence
withrespecttotheconceptofthedutyofloyaltyowedtoanemployer,not
onlybydirectorsbutalsobyseniormanagerialofficersortopmanagement
officialsofacompany.Thisrule,knownasthe”StrictEthicRule”,therefore
appliesinQuebectocertainkeyemployees.
AfterdiscussingthejurisprudencewithrespecttotheStrictEthicRule,the
courtsremindusthatemployeeswhoserelationshipwiththeiremployeristhat
ofleaseandhireofpersonalservices,haveadutytotheirformeremployer
onlywithrespecttotradesecretsandtheconfidentialityofcustomerlists.The
courthad,therefore,todecidewhetherBaumannwasasimpleemployee,
albeitanimportantone,orwhetherhewasamandataryofBTG,inwhich
casehewouldowethesortoffiduciarydutyreferredtoabove.
Mr.BaumannwasgiventhetitleofTechnicalManagerofBTG.Hisdutywas
toascertainthattheequipmentsoldbyBTGwasproperlyinstalledand
startedupatthecustomer’sbleachplant.Itwasalsohisresponsibilityto
implementcontrolstrategiestomeetthespecificrequirementsofthe
customer.However,Mr.Baumannhadnocontroloversubordinates.
Baumannwas,therefore,chargedwithlendingtechnicalsupporttothesales
forceofBTGandafterthesaleofequipmentwasconcludedorclosed,his
responsabilitywastoensurethattheequipmentwasproperlyinstalled,
startedupandthattheappropriatecontrolstrategiesrequiredbythe
customerwereprovided.Hespentmorethan50%ofhistimeinthebleach

plantsofBTG’scustomersandwashisemployer’sprincipalcontactwithits
customers.
Thecourtstatedclearlythatnoevidencewasadducedtodemonstratethat
Baumannhadanyresponsibilitiesforcustomercontactotherthantechnical
support,orthathehadestablishedapersonalrelationshipwiththecustomers
totheextentthathecouldhavemadeBTGparticularlyvulnerabletolossby
Baumann’ssolicitingthemafterhisdeparture.
ThecourtheldthattheevidencewastotheeffectthatBaumannwasnota
seniormanagementofficerorpartofthe”topmanagement”ofBTG,norwas
heinapositionwherehehadadegreeofcontrolorauthorityinthe
corporateoperationsofhisemployer.Infact,oneofthereasonsBaumann
lefthisemploymentwasthathefoundthatthetasksassignedtohimwere
wellbelowthetraininghehadreceivedandhisqualificationsand
competencyasanengineer.Thecourtdrewaninferencefromthefactthat
Baumann’sdutiesweretakenoverbyaservicetechnicianasfurther
evidencethatheneverheldapositionwithinBTGthatwouldimposeupon
himthefiduciarydutydescribedinthejurisprudence.
Thecivillawconceptofmandatewasthendiscussedbythecourt.A
mandateunderQuebeclawisacontractbywhichaperson”commitsa
lawfulbusiness”tothemanagementofanotherwhoundertakestoperformit.
Assuch,itwasclearfromtheevidencetothecourtthatBTGdidnotcommit
toBaumannthemanagementofalawfulbusiness.
Thecourtwentontoconsidertheimpliedtermsofthecontractofleaseand
hireofpersonalservicesthatBaumannsigned.Itwasrecognizedbythecourt
thatinsuchcontracts,thereexistimpliedobligationstotheeffectthatan
employeemustactingoodfaithandwithfidelityinrelationtohisorher
employer.Theimpliedobligationsofloyaltyandtrustassumethatthe
employeewillnottaketheemployer’spropertyinanyform,beittrade
secrets,goodwillorothermaterialthingssuchasplans,listsofcustomers,or
thingsofthatnature.
Theseprinciplesaresimilartothosefoundinthecommonlawjurisdictionsand
havebeenrecognizedasbeingapplicableinQuebecbytheQuebec
courts.Infact,theHonourableJusticeLesyk,whorenderedtheBTGdecision,
madeextensivereferencetocommonlawdecisionsinsettingouthisworking
definitionoftheconceptsoftradesecretsandconfidentialinformation,
whichofcoursemustincludetheessentialelementsofsecrecyor
confidentialityinorderthattheybeaffordedprotection.
Furthermore,thecourtcitedcommonlawjurisprudencetotheeffectthatthe
dutytorefrainfromusingordivulgingtradesecretsdoesnotpreventaperson

fromusinggeneralskillandknowledgeacquiredduringhisorher
employment.Therationalebeingthatboththeemployeeandthegeneral
publicareentitledtobenefitfromtheemployee’sacquiredgeneralskilland
knowledge.IthasalsobeenestablishedinQuebeccaselawthatthe
employerorthepersonwhoinvokesarestrictivecovenanthastheonusor
burdenofprooftoestablishtheconfidentialnatureofspecificinformation
and/ortradesecretsthatrelatetotheirbusinessinanyparticularcase.This
dutywasinferredfromthebasicprinciplesofevidencefoundintheCivil
CodeofQuebec.
Thecourtconcludedthattheresidualchemicalanalyzersandbrightness
transmitterssoldbyBTGarewell-knowntotherelevanttradeandhadbeen
onthemarketforquitesometime.Theycouldnot,accordingtothecourt,
beheldtobetheexclusivepropertyoftradesecretsofBTG.BTGwasunable
toproveany”objective”knowledgebelongingtoitasopposedto”general”
knowledge.
AstoBaumann’sdevelopmentofhisownapparatus,thecourtstatedthathe
wasentitledtouseallhisskillsorknowledgetomanufactureabrightness
residualsensor.Thisincludeshispersonalaptitude,skill,hismanualand
mentalabilities,hisformalacademictrainingattheSwissFederalInstituteof
Technologyandhispreviousexperienceandknowledgeacquiredduringhis
previousemploymentwithBussinSwitzerland.Thisfindingofthecourtwas
alsobasedonjurisprudencefromthecommonlaw.Thejudgestatedthatall
ofthisknowledge,information,skillandpriorexperienceconstituted
subjectiveknowledge,andthatBaumannhadnotviolatedanyexpressor
impliedobligationarisingoutofhiscontractofleaseandhireofpersonal
serviceswithBTG.
AstoBaumann’ssolicitinghisformeremployer’scustomers,thecourtcited
commonlawjurisprudencetotheeffectthatsuchsolicitationislegalwhen
thosenamesareobtainedthroughmemoryorthroughatradedirectory.
Conclusion.Animportantdistinctionmustalwaysbemadebetweenthe
obligationsofaformeremployeehiredunderacontractofleaseandhire,
andthoseofonewhomaybedescribedasakeyemployee.Theobligations
ofthelatteraregovernedbytherulesofmandateinQuebeccivillaw.
Quebeccourtsoftenrelyoncommonlawprinciplesindecidingthe
obligationsofformeremployees,butphrasethemdifferentlyandin
accordancewithconceptsforeseenbytheCivilCode.
CompanieshiringkeyemployeesinQuebecshouldnot,however,takefor
grantedthatallofthecommonlawprinciplesapplicabletosuchcontracts
willreceivethesamekindofapplicationinQuebecastheywouldinthe

otherprovincesandassuch,shoulddetailtheobligationsofthepartieswith
respecttoterminationinanadequatemanner.

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