The case of  Loreto v. Little et al, 2010 ONSC 755 deals with how the law is a little different with non-competition, non-solicitation or confidentiality clauses for lawyers, doctors, dentist and other professionals that have files and payient lists.  You can read the case here.

Most of this commentary is pulled verbatim from this case. Normally when an employee departs his or her employer certain things are well known and set in place. Outward-bound employees, as a general rule, have certain responsibilities when they depart their employer. At the very least, in the absence of any restrictive contractual provisions, the departing employee has an implied obligation of fidelity. A departing employee may set up shop in competition with her previous employer; she can even contact clients or customers utilising a public phonebook, but he/she can’t take and apply client lists to establish these calls. Normally when the outward-bound employee is a fiduciary, the rules become more constrained. He/she cannot contend with his/her previous employer or solicit customers for at least a commonsensical period of time. And he/she certainly cannot use customer lists belonging to the employer to contact clients and solicit business. However, in cases involving professionals, such as lawyers or doctors or any other professional these “general” rules do not really apply.

A dissimilar approach is assumed principally because of the personal nature of professional services and the client’s right to choose which professional to do business with. In the case of Goodman v. Newman the Judge noted that pofessionals such as doctors, dentists and lawyers do not have the same proprietary right to their patient or clients as does a corporation to its customers. Professionals provide a personal service and establish a personal relationship with their clients, regardless of where or how the client or patient arrived at the firm or practice. The client or patient ought not to be “handcuffed’ to the business. Clients should have freedom of choice.

In the case of Bacher v. Obar, (1989) 28 C.C.E.L. 160, a case in which a departing dental practitioner, in the absence of a restrictive covenant, set up shop across the street and continued to care for any patients who sought-after his services including those he had cared for at the clinic he had just left. The Judge noted in this case that patients have the right to choose their dentist. They are not property to be bought and sold like inventory. Each dentist had the right to provide service to anyone who requested it.

In the case of Layne v. Michaels,out of British Columbia, the Judge noted that it is for the client to decide who will represent him. And if the client chooses to follow the departing associate, the firm does not have the power to veto.

In the case of Vertlieb Anderson v. Nelford, also out of B.C., the Judge noted that if a client chooses to leave with an associate, the associate is obviously taking a business advantage which belonged to the firm. However, as set out in Can. Aero, there is a way of taking a business advantage which breaches one’s fiduciary duty and a way that does not. The unique aspect of the associate’s simultaneous and overriding fiduciary duty to his client means that it is the client and not the firm who actually sanctions the taking of the business advantage. So what does this all mean? It means that normally departing professionals will normally be looked at as fiduciaries having fiduciary obligations because of the power and control they have been given over their files/patients…etc.

Normally the departing will not only have a right to contact former clients, but he/she normally has an obligation to contact the client and tell her that he/she has departed from the firm or practice. This will normally not constitute solicitation. It is important to know that for lawyers, a 2009 Law Society guideline clearly mirrors the long-standing requirements of Canadian law by saying that clients should be told of their options for continued representation by the firm, by the departing firm member or by a new lawyer or paralegal chosen by the client…If the firm will not agree to provide clear direction on how the clients will be notified of the lawyer’s or paralegal’s departure, the departing lawyer or paralegal should advise the clients in a neutral manner that he or she is leaving and of the client’s options for continued representation. In an ideal world, the firm and departing lawyer would cooperate and the firm would take the lead in contacting the affected clients and presenting them with the three options.

If you are an employer, what you don’t want to do is where you learns of your junior professional’s intent to leave the practice then to lock the junior personal out immediately. This is an instinctive reaction. It is an instinctive reaction of senior professionals to think that all the patients or clients are his/hers. The senior professional is wrong in this. There is no property in a dentist’s patients and, similarly, in my view, there is no property in an optometrist’s patients. These clients/patients are free to follow the departing employee if that client/patient wishes to do so. LIke I mentioned above, a departing employee has a right and a duty to notify them of their new location. [ What about breaches of confidentiality? Again, in the case of professionals such as doctors, lawyers or dentists, A departing attorney or other professional is allowed to take, even to download, a listing of the clients, patients she/ he has personally acted for with in order to contact them and offer them the choice to remain of tocome with him/her and continue the relationship. For example, in the case of Lodwig v. Mather, the court found that a departing dentist has the right to print off a list of patients from the employer’s computer in order to identify and contact the patients he personally treated. The Judge in this case said that a dentist who practices as an associate or even as an employee of another dentist, has the right to have access to or retain the names of the patients with whom he or she has had an exclusive or primary dentist-patient relationship and to advise those patients of the change of location of his or her practic In Goodman v. Newman the court found that a departing dentist who took with him a list of the five or six hundred patient that he had personally cared for did not offend any duties of confidentiality. The client list was not confidential information. In the case of Cressman the Judge concluded that downloading a lost of patients who the departing optometrist was scheduled to see over the next two months, contacting them and telling them about her departure and then giving them a choice of staying with her or with the old practice was something the optometrist “had both a right and a duty to do.” Therefore normally it will be clear that the use of the clinic’s or firm’s client list to contact their clients/patient lists and provide them with the required choices will not be a breach of any duty of confidentiality.

This is not legal advice.  It is a case comment taken from the above noted case.

The courts have dealt with another case involving Canac Kitchens termination of its employees as a result of a slowdown and subsequent cessation of the business in Ontario.  In this action the Plaintiff, Mr. Contreras was 49 years of age.  He was 46 at the time he was terminated and had been with Canac for 30 years.  He remained on unemployment since his termination.  There are several important issues to be dealt with in this case that are often questions asked by clients.  They are as follows:

1. What was the period of reasonable notice for Mr. Contreras?
2. Did he take reasonable steps to mitigate his damages (find another job)?
3. Are the long-term disability benefits that he received for his termination deductible upon any severance?
4. Was he entitled to a pay increase or bonus during the notice period?
5. Did Cancac properly deduct $1,700.00 from his vacation pay at the time of his termination?
6. Was he entitled to vacation pay during the notice period?
7. Was he entitled to overtime compensation during the notice period?
8. What compensation should Mr. Contreras receive for benefits during the notice period?

It is important to note that Mr. Contreras had injured himself twice during the period of employment before his termination.  He was out once for 5 months because of injuries sustained in a car accident and once for 9 months because of a slip and fall accident.  He would return to accommodated duties and he was terminated soon after.

At the time of termination he was offered 9 months payment in lieu of notice which he did not accept.  He began litigation.

With respect to reasonable notice, Mr. Contreras submitted based on past Canac decisions that he was entitled between 18 and 21 months reasonable notice.  The Judge went through the 4 cases which dealt with terminations of supervisors at Canac.  One case dealt with a supervisor that was 46 and had been with the company for 17.5 years.  He was awarded 17.5 months.  The second dealt with a supervisor that was 59 years and was terminated after 19.25 years of service.  He was entitled to 18 months.  The third dealt with a supervisor that was 52 and was terminated after 21 years of service.  He was entitled to 21 months.  The last supervisor was 43 at the time of termination and had 27.5 years of service.  He was entitled to 26 months of notice.

The Judge advised that Mr. Contreras was 46 at the time he was terminated, and he was with Canac for 20 years.  He was a supervisor.  Although he had been performing modified duties for 9 months prior to his termination, the Judge still found he was a supervisor.  Having regard to his position of employment, his age and his years of service, and his prospects for re-employment, which were not great in the current economy and job market, the Judge awarded him 18 months.

With respect to mitigation, the Judge was not prepared to find that Mr. Contreras failed to mitigate his damages.  He applied to other jobs but this issue rested on Canac failing to meet its onus to establish that Mr. Contreras failed to make reasonable steps to mitigate.  It is important to note that it is up to the Defendant lawyer to prove this part of the case.

With respect to the long-term disability benefits, the Judge went through several key cases including Supreme Court of Canada cases.  He was of the view that the long-term disability that Mr. Contreras received for his injuries, should not be deducted from the amount that Canac was required to pay in lieu of notice.  The Judge based his decision on several cases.  The seminal case of Sylvester v. British Columbia where the court held that in certain circumstances, where an employee was dismissed while not working but receiving disability benefits which had been paid for by the employer, it was inconsistent for the employee to receive both disability benefits and wrongful damages under the employment contract.  It was a double recovery that wasn’t seen well.

Following Sylvester v. British Columbia, the issue of an employer was relieved from its obligation to pay damages for wrongful dismissal had been considered by the Court of Appeal.  There are a few cases that found that Sylvester v. British Columbia did not stand for the proposition that an employer was relieved from its obligation to pay damages from dismissal by virtue of the existence of the disability plan.  It merely provides that disability benefits are deductible from damages in certain circumstances.  The question of deductibility is to be decided based on the terms of the employment contract and the intention of the parties.  In this case the Judge felt there was no evidence or express provision on the employment agreement preventing double recovery.

With respect to increases in salary or bonuses during the notice period, the Judge found that Mr. Contreras was not entitled to receive any amounts on account of a bonus prior to the termination or during the notice period.

With respect to vacation pay, the Judge found that there was no evidence before him as to what the terms of employment were with respect to the entitlement of vacation pay.  In fact Mr. Contreras received vacation pay over and above his salary according to Canac’s records.  In short, Mr. Contreras was not entitled to claim repayment of $1,776.01 deducted by Canac.

With respect to overtime, the Judge found that Mr. Contreras had consistent overtime.  He went through the 2005, 2006, and 2007 overtime records and he found that Mr. Contreras should be entitled to receive $4,500.00 in respect of overtime to be calculated on a prorated basis to the notice period.

With respect to out-of-pocket expenses, the Judge found that Mr. Contreras was entitled to $810.00 for a dental bill, drug bill and physiotherapy bill.

Therefore the Plaintiff was entitled to 18 months based on his salary of $58,300 plus $6,750 on account of overtime ($4,500 ÷12 x18) for a total of $94,250.  From that sum was deducted ESA payment of $31,615.58 which was paid to Canac immediately upon termination.  The amount owing was approximately $62,000.00 plus incidentals discussed above.

This case is good to read and contains a numerous amount of issues that are often dealt with by employment lawyers.  If you have any questions, please do not hesitate to contact Matt Lalande at matt.lalande@haber-lawyer.com or (905)-639-8894.  This is not legal advice.  We are not your lawyers unless a formal retainer has been executed.

If an employer goes bankrupt things can get complicated.  The first thing that you must recognize is whether or not you had a fixed-term contract.  A fixed-term contract is one where you and your employer both agree at the time of your hiring that you will be paid a certain amount upon termination without cause.  Normal executive contracts will contain a maximum period of notice of 24 months or some other parachute clause.  A bankruptcy of an employer doesn’t normally alter the amount owing to a wrongful dismissal employee.  It does not terminate a severance that was validly entered into by the bankrupt employer.

Normally upon the bankruptcy of an employer, employees do become entitled to common law or statutory payments in lieu of notice from the bankrupt employer.  What is important however is that claims are typically determined under the Bankruptcy and Insolvency Act and because of this, an employee usually is not able to start a wrongful dismissal action against the bankrupt employer outside of the Bankruptcy and Insolvency Act.  Conversely, if the Trustee that became the legal employer of the bankrupt’s employees, than that Trustee may become liable for reasonable notice payments or statutory termination payments, only from the date of its appointment.

The bankruptcy of an employer is not an easy thing to figure out with respect to severance.  The long and the short is that an employer’s bankruptcy causes the employment contract between the employer and the employee to come to an end.  You are still entitled to common law statutory notice and severance payments.  Trustees and Receivers appointed under the Bankruptcy and Insolvency Act are not normally liable for obligations of payment in lieu of notice of the debtor employer for claims arising before their appointment.  What is important to remember is that Trustees and Receivers can become liable to employees if they continue the employee’s employment after the bankruptcy.  Employees must seek their remedy with respect to severance from the termination as a result of the bankruptcy under the terms of the Bankruptcy and Insolvency Act. Normally, an employee cannot commence or maintain an action for wrongful dismissal against a bankrupt employer; however the amount of damages an employee is entitled to is not altered as a result of a bankruptcy.  Claims for common law, under statutory law, payment in lieu of notice or severance payments would be claims that are provable in bankruptcy under the Bankruptcy and Insolvency Act and employees are classified as ordinary unsecured creditors most of the time.

This is not legal advice and it does not pertain to any specific situation. All facts are different and must be approached with a different legal perspective. If you have any questions with respect to bankruptcy and termination of your employees, please do not hesitate to contact Haber & Associates.  We are Hamilton Employment Lawyers that would be pleased to assist you in properly dealing with your matters.