The test to determine whether a fiduciary relationship exists between an employer and a departing employee is easy to explain. The application of the test, however, is anything but simple. In the recent Alberta Court of Queen’s Bench decision, Jardine Lloyd Thompson Canada Inc. v. Harke-Hunt, 2013 ABQB 313, Justice Manderscheid signals a willingness on the part of the court to order an interim injunction enjoining a former employee from soliciting customers and clients of the former employer where, at least early on in the assessment of the case, it appears that the former employee could be a fiduciary and issuing the injunction would have little impact on the business of the former employee.
The applicant, JLT, sought an interlocutory injunction against a former employee, Ms. Harke-Hunt, and her new firm, Insight Insurance and Risk Management Ltd., enjoining both from soliciting employees and clients of JLT. Ms. Harke-Hunt, resigned from her employment with JLT earlier this year after nearly 24 years of service to the company. At the time of her resignation, she was Managing Director and National Practice Leader for JLT’s Sports, Hospitality and Leisure Division. Sometime after giving notice of her resignation, but before the end of her employment with JLT, Ms. Harke-Hunt established Insight and became its CEO.
The court considered arguments concerning the restrictive covenants contained in Ms. Harke-Hunt’s employment agreement and about her alleged fiduciary relationship with JLT. Justice Manderscheid declined to rule on the enforceability of the restrictive covenants in the employment agreement. He found no way of determining, based on the evidence in front of him, whether the agreement continued to apply to Ms. Harke-Hunt’s employment given the significant changes in not only her responsibilities over the past 24 years, but also the significant changes to the corporate structure of her employer. This issue, he found, would have to be left for determination at trial.
However, Justice Manderscheid had no difficulty finding that Ms. Harke-Hunt was a member of the “top management cadre” of JLT and a key employee. He specifically relied on Ms. Harke-Hunt’s efforts to establish a valuable book of business and her long-standing personal and trust relationships with some of JLT’s important clients. Justice Manderscheid also found that Ms. Harke-Hunt had some decision-making authority and could exercise her discretion at least with respect to the Edmonton office of JLT. This finding is interesting given submissions from the respondents that JLT has operations around the world and Ms. Harke-Hunt had little influence beyond the Edmonton office and her own specialized division of the company.
In his decision, Justice Manderscheid also seems to emphasize the fact that because the respondents had not solicited any of JLT’s clients and employees, the respondents would not be negatively impacted by the issuance of an injunction. In fact, Justice Manderscheid relied on an admission made by counsel for the respondents during the hearing that they would have no problem with an interlocutory injunction limited to restrictions on solicitation and confidential information.
This case is also a helpful reminder for employers to regularly review their employment agreements. A series of mergers or company reorganizations may render an employment agreement unenforceable if it is not drafted carefully. The passage of significant time, too, especially where the employee’s duties and responsibilities are no longer reflected in the terms of the agreement can result in an unenforceable contract. Employers should ensure that the terms of the employment agreement accurately reflect the reality of the employment relationship, or they risk finding out in court that the contracts are not worth the paper they are printed on.