Competing with your employer will get you fired
Competing with your employer will almost always get you fired. It will often get you fired without a severance package and facing challenges in collecting employment insurance.
In Ontario, there are two ways for a terminated employee to proceed with respect to a severance package. The first is a complaint pursuant to the Employment Standards Act of Ontario. That will get you a week per year of completed service to a maximum of eight weeks. If you’ve been there more than five years and the employer has a yearly payroll of more than $2.5 million, it will also get you severance pay of a week per year to a maximum of 26 weeks.
If you file that complaint, you can never go in front of a judge and sue for more through the civil courts. If you sue for more through the civil courts, you cannot file the complaint with the Ministry of Labour for the minimums set out above. You have to choose.
Bill worked for a company that had a payroll of more than $2.5 million for just over five years. His employer ran clinical trials and provided analytical services for pharmaceutical companies, hospitals and other medical researchers. Bill was the manager of clinical operations. He had great performance reviews and was valued in the company.
One day, a client told Bill’s boss that he had been searching Bill’s name and found it connected with a competing organization. The boss went online and found that there was a website for a company and Bill was listed as one of the principals. It offered the same services as Bill’s employer. Research revealed that Bill was listed as a director of the company, along with one of the people who reported to him in his regular job.
When Bill was confronted with this information, he explained that it was not a full-blown company. It had been incorporated a couple of years before and a website set up, but no business had ever been obtained. It had no employees and it had never had any revenues. It was a grape that died on the vine.
Bill explained that when he came up with the idea, he did not realize how difficult it was to start a company. He said the company was effectively dead. He had never solicited clients of his employer and, in fact, his new company never had even one client. It was incorporated just before the pandemic and quickly became a dud. He had never spent any of his regular working time engaged in the new business and would not have had time to anyways since he was already working 60 to 80 hours a week for his employer. There was no evidence that he shared confidential information belonging to his employer with anyone else involved in the new company.
Bill’s employer terminated both him and the employee who reported to him who had become involved in the new company.
Instead of filing a lawsuit through a lawyer with the courts, Bill filed a complaint with the Ministry of Labour. He had been there just over five years so he was entitled to five weeks’ termination pay and five weeks’ severance pay as a minimum if he won his case.
You are entitled to these minimums if you are not guilty of wilful misconduct, wilful disobedience or wilful neglect of duty that is not trivial and has not been condoned by the employer.
Not surprisingly, Bill’s employer had an extensive, well-circulated code of conduct. Bill was retrained in it every two years and signed periodically, acknowledging he had read and understood it. That code made it clear that competing in any way with the employer was a breach.
It also made it clear that engaging in outside employment, whether it was competitive or not, obliged the employee to disclose that employment or endeavour to the company. It said that outside employment would not be approved if it involved providing services (whether or not compensation was received) to an organization that provides a competitive service in the marketplace. Lastly, it prohibited employees from being on the board of directors for businesses without company approval.
Bill had broken a lot of rules. The Ontario Labour Relations Board found that Bill had been guilty of wilful disobedience and he lost his case.
In Bill’s situation, the company won because it had an extensive code of conduct. If that did not exist, and given that no harm was done to the company, it might have had to pay out. If Bill had sued in the civil courts and been before a judge, the test would have been slightly different. A judge relies on hundreds of years of case law that determine what is and is not “just cause.”
For most judges, competing, or even trying to compete, with your employer would constitute just cause and the end of the claim, whether or not there was a written rule against it.
This article was originally published by The Hamilton Spectator.
