Court rules employees can testify against ex-employer
Can you stop a former employee from testifying on the ground that his testimony against you violates his contractual obligation of confidentiality?
That very interesting question recently arose in Ontario as a result of several corporate acquisitions. This context makes it very important, of course, given the number of mergers and acquisitions we see these days in our economy.
The employees in this case once worked in pension administration at National Trust. Chrysler Canada kept its employees’ pension money under National Trust administration. National Trust then sold its pension business (including the Chrysler business) to Canada Trust, and the pension-administration employees along with it. Canada Trust “bought” the employees specifically for their pension fund expertise.
Then, CIBC Mellon bought Canada Trust’s pension business (hang with us, here!), and (again!) the employees with it. In other words, CIBC became the employees’ third employer, although their jobs did not change substantially.
Meanwhile, Chrysler sued National Trust (the original employer), alleging that, from 1988 to 1992, National had breached its duties properly to monitor the compliance of the Chrysler pension fund with statutory and other rules.
As the current fund administrator, CIBC Mellon joined Chrysler in suing National Trust, setting the stage for the witness problem: CIBC was suing National Trust over pension administration while employing people who had worked at National
Trust in pension administration at all the times in contention. That is, the employees were in essence potential witnesses against their employer, albeit twice removed.
National Trust cried foul, arguing that its employee policies forbade employees and former employees from divulging its confidential information. Anything that put its business in jeopardy was a corporate secret, it said, including lawsuits for negligence and breach of fiduciary duties.
Q Did the employees’ potential evidence amount to confidential corporate information?
A Justice Katherine Swinton, of the Ontario Superior Court, recently ruled that CIBC and Chrysler can interview the employees as potential witnesses against National Trust.
“The information which National Trust seeks to protect,” Justice Swinton held, “is not in the nature of proprietary trade secrets, but is simply information relevant to the potential liability of National Trust to its former client [Chrysler].
“Nor can National Trust assert any legitimate commercial interest in protecting itself from competitors, as it is no longer in the pension and institutional trust business. National Trust’s view that anything learned in the course of business is confidential is not the obvious interpretation of the employment contract, especially given the nature of the company’s obligations, as trustee, to its clients, and given its sale of the pension business and transfer of its employees — first to Canada Trust and then to CIBC Mellon.
“The language of the [policy] handbooks is not sufficiently precise to alert employees that they have assumed a contractual obligation that bars them from speaking about anything prejudicial to the company or that may expose it to liability — even after termination of their employment, and for an indefinite period.
“An employee reading these documents would more reasonably conclude that he or she had an obligation to respect the confidentiality of client information [i.e., not the confidentiality of National Trust’s business practices], and use it only for intended business purposes.”
For more information: CIBC Mellon Trust Co. v. National Trust Co., Ontario Superior Court file 94-CQ-56034A, Sept. 19/00.
Application of federal labour code to Internet service suppliers could have far reaching implications
Meanwhile, employment law has seen an equally important development for unionized workplaces. The Canada Industrial Relations Board has decided that employees of Internet service providers (ISPs) must be federally regulated. And labour-law specialists expect that the ruling will apply beyond ISPs to any enterprise that does a significant amount of Internet-related business.
Under the federal regime, employees are governed by the Canada Labour Code, which is different in several ways from provincial codes. For example, the federal code is more union-friendly than most provincial codes (it endorses the card certification system, for instance, instead of certification of unions by majority vote), and it allows reinstatement as a remedy for grievances, even for employees who are not union members.
The ruling also means that ISPs will be regulated by federal law in general, not just the national labour code.
The decision arose from a request by a union at a Prince Edward Island ISP, Island Tel Advanced Solutions Inc., for a board declaration that Advanced was inseparably connected with its parent company, Island Telecom. That is, Advanced wanted the board to certify that there was a single employer.
The Board granted the declaration, meaning that Advanced became a federal undertaking by association with its parent.
Q How can an employer doing business out of a single province be “federal?”
A Although both Island Telecom and its Advanced subsidiary are located within P.E.I., they provide their customers with the ability to communicate across Canada and internationally. And of course media such as television, radio and other telecommunications are under federal authority. That’s why the Canadian Radio and Television Commission exists. And that, the board said, is what brought the Advanced employees under federal law.
The board noted that once Advanced customers used its services as an Internet gateway geographical boundaries disappeared. So Advanced could not argue that it was a provincial undertaking.
For more information: Island Telecom Inc. (Re), CIRB Decision No. 59, Board Files 18403-C, 18729-C.
Jeffrey Miller is editor of Canadian Employment Law Today. For subscription information, call (416) 609-3800 or (800) 387-5164.
That very interesting question recently arose in Ontario as a result of several corporate acquisitions. This context makes it very important, of course, given the number of mergers and acquisitions we see these days in our economy.
The employees in this case once worked in pension administration at National Trust. Chrysler Canada kept its employees’ pension money under National Trust administration. National Trust then sold its pension business (including the Chrysler business) to Canada Trust, and the pension-administration employees along with it. Canada Trust “bought” the employees specifically for their pension fund expertise.
Then, CIBC Mellon bought Canada Trust’s pension business (hang with us, here!), and (again!) the employees with it. In other words, CIBC became the employees’ third employer, although their jobs did not change substantially.
Meanwhile, Chrysler sued National Trust (the original employer), alleging that, from 1988 to 1992, National had breached its duties properly to monitor the compliance of the Chrysler pension fund with statutory and other rules.
As the current fund administrator, CIBC Mellon joined Chrysler in suing National Trust, setting the stage for the witness problem: CIBC was suing National Trust over pension administration while employing people who had worked at National
Trust in pension administration at all the times in contention. That is, the employees were in essence potential witnesses against their employer, albeit twice removed.
National Trust cried foul, arguing that its employee policies forbade employees and former employees from divulging its confidential information. Anything that put its business in jeopardy was a corporate secret, it said, including lawsuits for negligence and breach of fiduciary duties.
Q Did the employees’ potential evidence amount to confidential corporate information?
A Justice Katherine Swinton, of the Ontario Superior Court, recently ruled that CIBC and Chrysler can interview the employees as potential witnesses against National Trust.
“The information which National Trust seeks to protect,” Justice Swinton held, “is not in the nature of proprietary trade secrets, but is simply information relevant to the potential liability of National Trust to its former client [Chrysler].
“Nor can National Trust assert any legitimate commercial interest in protecting itself from competitors, as it is no longer in the pension and institutional trust business. National Trust’s view that anything learned in the course of business is confidential is not the obvious interpretation of the employment contract, especially given the nature of the company’s obligations, as trustee, to its clients, and given its sale of the pension business and transfer of its employees — first to Canada Trust and then to CIBC Mellon.
“The language of the [policy] handbooks is not sufficiently precise to alert employees that they have assumed a contractual obligation that bars them from speaking about anything prejudicial to the company or that may expose it to liability — even after termination of their employment, and for an indefinite period.
“An employee reading these documents would more reasonably conclude that he or she had an obligation to respect the confidentiality of client information [i.e., not the confidentiality of National Trust’s business practices], and use it only for intended business purposes.”
For more information: CIBC Mellon Trust Co. v. National Trust Co., Ontario Superior Court file 94-CQ-56034A, Sept. 19/00.
Application of federal labour code to Internet service suppliers could have far reaching implications
Meanwhile, employment law has seen an equally important development for unionized workplaces. The Canada Industrial Relations Board has decided that employees of Internet service providers (ISPs) must be federally regulated. And labour-law specialists expect that the ruling will apply beyond ISPs to any enterprise that does a significant amount of Internet-related business.
Under the federal regime, employees are governed by the Canada Labour Code, which is different in several ways from provincial codes. For example, the federal code is more union-friendly than most provincial codes (it endorses the card certification system, for instance, instead of certification of unions by majority vote), and it allows reinstatement as a remedy for grievances, even for employees who are not union members.
The ruling also means that ISPs will be regulated by federal law in general, not just the national labour code.
The decision arose from a request by a union at a Prince Edward Island ISP, Island Tel Advanced Solutions Inc., for a board declaration that Advanced was inseparably connected with its parent company, Island Telecom. That is, Advanced wanted the board to certify that there was a single employer.
The Board granted the declaration, meaning that Advanced became a federal undertaking by association with its parent.
Q How can an employer doing business out of a single province be “federal?”
A Although both Island Telecom and its Advanced subsidiary are located within P.E.I., they provide their customers with the ability to communicate across Canada and internationally. And of course media such as television, radio and other telecommunications are under federal authority. That’s why the Canadian Radio and Television Commission exists. And that, the board said, is what brought the Advanced employees under federal law.
The board noted that once Advanced customers used its services as an Internet gateway geographical boundaries disappeared. So Advanced could not argue that it was a provincial undertaking.
For more information: Island Telecom Inc. (Re), CIRB Decision No. 59, Board Files 18403-C, 18729-C.
Jeffrey Miller is editor of Canadian Employment Law Today. For subscription information, call (416) 609-3800 or (800) 387-5164.
