Ontario’s Court of Appeal has ruled that meeting and planning future employment with a competitor is not a breach of an employment agreement.
The ruling comes in the wake of a protracted legal battle between EF Institute for Cultural Exchange Limited and DC, who was once the president of EF and later joined its competitor, WorldStrides Canada, Inc.
Background
Both EF and WorldStrides are Canadian arms of global educational tour companies. DC, who began his employment with EF in 2005 and rose to the position of president by 2011, was dismissed without cause in September 2014.
He negotiated a severance agreement that included a number of key terms, including compliance with the confidential information clause of the employment agreement; compliance with the restrictive covenant; access to outplacement services at the company’s expense; and payment of $225,000 in two “tranches.”
The first payment was to be made within 30 days of signing the severance agreement and the second was due on the one-year anniversary, at which point the confidentiality clause expired. (This was the non-compete period.)
DC joined WorldStrides as general manager in October 2015, one day after the expiry of the restrictive covenant in his EF employment agreement, which had limited his ability to compete with EF.
EF filed a lawsuit against Conklin and WorldStrides in November 2015, initially claiming damages against both for a combined amount of $10 million, which was later significantly reduced. EF also sought various forms of injunctions, but these claims were also narrowed over time.
The appeal
In the appeal heard on Aug. 23, 2023, EF sought to set aside a judgment in favor of DC and WorldStrides and remit the matter for trial. EF argued, among other things, that DC had breached confidentiality and fiduciary duties.
The court, however, found that the evidence did not amount to any breach of confidentiality by DC. The court noted, “Neither the notes of the interview, which consist mostly of questions that would be expected at a job interview, nor the resume, contain EF’s ‘sensitive’ confidential information.”
The court cited a previous decision, Guzzo v. Randazzo, 2015 ONSC 6936, stating that meeting with a prospective future employer that is a competitor is not, on its own, a breach of fiduciary duties. The court found that “such non-sensitive information had little if any impact on competition.”
In essence, the court ruled that DC’s actions were not a violation of his employment agreement with EF.
Case”s long history
The appeal court recited the long procedural history of this case, which started in November 2015 with EF filing claims of $5 million against DC and an additional $5 million against his new employer for “knowing assistance of breach of fiduciary duties and inducing breach of contract.”
The claim narrowed over time. In January 2016, the amount of damages dropped to $300,000 each against DC and WorldStrides. In 2017, EF narrowed its claims further, dropping its request for damages and opting to pursue the return of $225,000 in payments it make to DC and the disgorgement of $35,657 by WorldStrides.
“EF’s case has dwindled and now seems to take the form of a corporate grudge match that does not deserve to be prolonged further,” the Court of Appeal noted in its judgment, dismissing EF’s appeal.
It awarded costs payable by EF to the respondents of $25,000 all-inclusive.
For more information, see EF Institute for Cultural Exchange Limited v. WorldStrides Canada, Inc., 2023 ONCA 566 (CanLII)
